[Federal Register Volume 89, Number 20 (Tuesday, January 30, 2024)]
[Rules and Regulations]
[Pages 5737-5757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01337]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 89, No. 20 / Tuesday, January 30, 2024 / 
Rules and Regulations

[[Page 5737]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 531, 532, 534, and 930

RIN 3206-AO39


Advancing Pay Equity in Governmentwide Pay Systems

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management is issuing final 
regulations governing the criteria for making salary determinations 
based on salary history to advance pay equity in the General Schedule, 
prevailing rate, Administrative Appeals Judge, Administrative Law 
Judge, Senior Executive Service, and senior-level and scientific or 
professional pay systems. For individuals receiving their first 
appointment as a civilian employee of the Federal Government (or a 
reappointment after a break in service) in one of these pay systems, 
agencies will not be able to set pay based on a job candidate's non-
Federal salary or pay history, which could vary between equally 
qualified candidates, or based on a competing job offer. Agencies will 
also be required to have policies regarding setting pay based on a 
previous Federal salary for employees who have previous civilian 
service in the Federal Government.

DATES: This final rule is effective April 1, 2024. Agencies must be in 
full compliance with this final rule not later than October 1, 2024.

FOR FURTHER INFORMATION CONTACT: Carey Jones by telephone at (202) 606-
2858 or by email at <a href="/cdn-cgi/l/email-protection#5525342c253a393c362c153a25387b323a23"><span class="__cf_email__" data-cfemail="ccbcadb5bca3a0a5afb58ca3bca1e2aba3ba">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Overview

    The Federal Government strives to be a model employer that values 
diversity, equity, inclusion, and accessibility (DEIA). After 
consideration of public comments on the proposed rule, OPM is issuing a 
final rule that amends the criteria for making salary determinations 
for the General Schedule (GS), prevailing rate, Administrative Appeals 
Judge (AAJ), Administrative Law Judge (ALJ), Senior Executive Service 
(SES), and senior-level and scientific or professional (SL/ST) pay 
systems to advance pay equity in pay setting for Federal employees. OPM 
is issuing this rule pursuant to its authority to issue regulations 
governing these pay systems in 5 U.S.C. 5333, 5338, 5343, 5372, 5372b, 
5376, and 5382.
    Generally, when an individual applies for a job and is being 
considered for employment, the employer may inquire about the 
individual's salary or pay history \1\ and consider it as part of the 
pay-setting process, if not otherwise prohibited from doing so. The 
employer may ask the candidate \2\ direct questions about salary 
history or the candidate may offer the information without prompting. 
The information can be solicited or shared at various points before an 
offer is accepted or rejected. These and other considerations of a job 
candidate's salary history are permissible under current statutes and 
regulations governing the GS, prevailing rate, AAJ, ALJ, SES, and SL/ST 
pay systems. Consideration of salary history is explicitly allowed 
under the Federal Government's GS pay system and is not prohibited by 
the prevailing rate, AAJ, ALJ, SES, and SL/ST pay systems.
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    \1\ For this rulemaking, ``salary history'' or ``pay history'' 
refer to the salary or pay a job candidate is currently receiving 
(i.e., their existing salary or pay) or the salary or pay the 
candidate has been paid in a previous job (i.e., prior salary or 
pay). The terms are used interchangeably.
    \2\ In this final rule, the terms ``applicant'' and 
``candidate'' are used interchangeably to refer to an individual 
under consideration for appointment to a Federal civil service 
position.
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    As described in the proposed rule and in this final rule, however, 
salary history is not necessarily a good indicator of worker value, 
experience, and expertise, and it also may contain or exacerbate 
biases. Pay setting based on 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. Nationally, on average women 
earn less than men, and this pay gap is even greater for most women of 
color.\3\ Gender and race/ethnicity pay gaps also exist in the Federal 
Government's civil service. Although such gaps are typically smaller 
than those in the private sector, they may represent an inequity as 
acknowledged by the President in Executive Orders (E.O.) 14035 (86 FR 
34593) and 14069 (87 FR 15315). As discussed further below, by 
eliminating a factor that may contain or exacerbate biases inconsistent 
with merit system principles, this final rule seeks to promote pay 
equity consistent with the President's Executive Orders.
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    \3\ Data on the national pay gap is available on the Department 
of Labor Women's Bureau website at https://www.dol.gov/agencies/wb/data/earnings.
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    For individuals receiving their first appointment as a civilian 
employee of the Federal Government (or a reappointment after a break in 
Federal service), agencies will no longer be able to set pay based on 
non-Federal salary history, which could vary between equally qualified 
candidates. Agencies also will not be permitted to consider a 
candidate's competing job offer when setting pay. Finally, agencies 
will be required to have policies regarding setting pay based on a 
previous Federal salary for employees who have previous civilian 
service in the Federal Government.

Background

    On June 25, 2021, President Biden signed E.O. 14035, titled 
``Diversity, Equity, Inclusion, and Accessibility in the Federal 
Workforce.'' \4\ To address any pay inequities and advance equal pay, 
section 12 of E.O. 14035 requires the Director of OPM to review 
Governmentwide regulations and, as appropriate and consistent with 
applicable law, consider prohibiting the use of an applicant's salary 
history when setting pay for a Federal employee.
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    \4\ See 86 FR 34593 (June 25, 2021).
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    On March 15, 2022, the President issued E.O. 14069, titled 
``Advancing Economy, Efficiency, and Effectiveness in Federal 
Contracting by Promoting Pay Equity and Transparency.'' \5\ Section 1 
of that E.O., describing the policy objectives of the E.O., notes that 
OPM ``anticipates issuing a proposed rule that would address the use of 
salary history in the hiring and pay-setting processes

[[Page 5738]]

for Federal employees,'' consistent with E.O. 14035.
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    \5\ See 87 FR 15315 (Mar. 15, 2022).
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    OPM reviewed the pay-setting regulations governing the GS, 
prevailing rate, AAJ, and ALJ, SES, and SL/ST pay systems. On May 11, 
2023, OPM issued a proposed rule at 88 FR 30251 in response to E.O. 
14035 and pursuant to its regulatory authorities in 5 U.S.C. 5333, 
5338, 5343(c), 5372(c), and 5372b(b).\6\ As explained in the proposed 
rule, the Federal Government's civilian personnel management systems 
are required to adhere to merit system principles established in law at 
5 U.S.C. 2301, including:
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    \6\ See 88 FR 30251 (May 11, 2023).
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    <bullet> All employees and applicants for employment should receive 
fair and equitable treatment in all aspects of personnel management 
without regard to political affiliation, race, color, religion, 
national origin, sex, marital status, age, or handicapping condition, 
and with proper regard for their privacy and constitutional rights. 5 
U.S.C. 2301(b)(2).
    <bullet> Equal pay should be provided for work of equal value, with 
appropriate consideration of both national and local rates paid by 
employers in the private sector, and appropriate incentives and 
recognition should be provided for excellence in performance. 5 U.S.C. 
2301(b)(3).
    For the GS, prevailing rate, AAJ, and ALJ structured pay systems, 
generally, an agency must set pay at the minimum rate for a new entrant 
to the civil service. The GS system is designed with standardized 
classification criteria for determining the grade levels of positions, 
and each GS grade has a range of pay consisting of ten step rates. The 
prevailing rate system under 5 U.S.C. chapter 53, subchapter IV, is a 
uniform pay-setting system that covers Federal Wage System (FWS) 
appropriated fund and nonappropriated fund employees. Generally, a new 
appointment to a GS or a prevailing rate position must be made at the 
minimum (step 1) rate of the grade of the employee's position. The AAJ 
pay system has six rates of basic pay--AA-1, 2, 3, 4, 5 and 6. Upon 
initial appointment, an agency generally must set the rate of basic pay 
of an AAJ who is new to the Federal Government at the minimum rate AA-1 
of the AAJ pay system. The ALJ pay system has three levels of basic 
pay: AL-1, AL-2, and AL-3. Pay level AL-3 has six rates of basic pay. 
Upon appointment to a position at level AL-3, an ALJ is generally paid 
at the minimum rate.
    Under each of these systems, the default is to set pay at the 
minimum rate, but agencies have the authority to set pay above the 
minimum rate for newly appointed employees if specific factors are 
shown. Under the GS pay system, the largest of the pay systems at issue 
in this final rule, an agency has the authority to set pay above the 
minimum rate if it determines that the candidate has superior 
qualifications or that the agency has a special need for the 
candidate's services under the criteria in 5 CFR 531.212(b). The 
current regulations at 5 CFR 531.212(c) state that an agency may 
consider one or more of nine specified factors or other relevant 
factors in making this step rate determination. One factor an agency 
can consider is the candidate's existing pay, recent salary history, or 
a salary documented in a competing job offer. 5 CFR 531.212(c)(2). 
Similarly, the AAJ, and ALJ pay systems allow consideration of current 
pay when setting pay for an applicant with superior qualifications who 
is not a current Federal employee. Under those circumstances, an agency 
sets the AAJ or ALJ pay at the rate that is next above the applicant's 
existing pay or earnings. 5 CFR 534.604 (for AAJ pay system), 930.205 
(for ALJ pay system). The prevailing rate pay systems also allow 
setting pay above the minimum rate based on special qualifications. The 
prevailing rate pay systems do not specifically list salary or pay 
history as an allowable factor in setting pay. See 5 CFR 532.403.
    There are also standard rules when setting pay for current and 
former employees upon various personnel actions such as reemployment, 
reassignment, promotion, transfer, or demotion, and the flexibility to 
set pay above the rate to which the employee would otherwise be 
entitled based on the employee's Federal salary history. For the GS pay 
system, an agency may use the ``maximum payable rate'' rule, which 
bases pay on the employee's highest previous rate of pay in a Federal 
civilian position. 5 CFR 531.221. The prevailing rate pay system also 
allows an agency to set an employee's pay at any rate (of the relevant 
grade) that does not exceed the employee's highest previous rate. 5 CFR 
532.405. For the AAJ and ALJ pay systems, an agency can set pay above 
the minimum rate for an appointee with prior Federal service either 
based on superior qualifications as used for new entrants or based on 
the highest previous Federal rate of basic pay. 5 CFR 534.604 (for AAJ 
pay system), 930.205 (for ALJ pay system).
    The SES and SL/ST pay systems do not require an agency to set pay 
at the minimum rate and, instead, require an agency to consider 
specific factors when setting pay. See 5 CFR 534.404(a), (g); 534.506. 
The SES and SL/ST pay systems are discussed in more detail in the SES & 
SL/ST Pay Systems section of this final rule.
    This final rule prohibits agencies from considering a candidate's 
salary history as a factor in setting pay for new Federal civilian 
employees. If an agency seeks to set pay above the minimum rate of the 
applicable rate range under the GS, prevailing rate, AAJ, or ALJ pay 
systems, that adjustment must be based on factors other than a 
candidate's non-Federal pay history, such as how pay has been set for 
employees who had similar qualifications (based on the level, type, or 
quality of the candidate's skills or competencies or other qualities 
and experiences) and have been newly appointed to positions that are 
similar to the candidate's position (based on the position's 
occupational series, grade level, organization, geographic location, or 
other job-relevant factors), if applicable. Similarly, when setting pay 
under the SES or SL/ST pay systems, the agency must base the pay on 
enumerated factors and cannot consider a candidate's non-Federal pay 
history. When setting pay based on prior Federal salary for reappointed 
or current employees, agencies must have a policy that supports 
consistency in setting pay for employees.
    In addition to the data summarized in the proposed rule, OPM 
considered comments received in response to the proposal. OPM received 
63 submissions representing 512 commenters during the 30-day public 
comment period from a variety of individuals (including Federal 
employees), organizations (including labor organizations), and Federal 
agencies regarding the substance of the proposed rule.<SUP>7 8</SUP> 
Comments ranged from strong support of the proposed rule to categorical 
rejection. OPM reviewed and carefully considered all comments. They are 
summarized below, together with a discussion of the suggestions for 
revisions and OPM's rationale for either adopting or declining those 
suggestions.
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    \7\ OPM determined one comment was beyond the scope of the 
proposed changes; that comment is not addressed below.
    \8\ One commenter recommended that OPM extend the rulemaking 
process and do more outreach to Federal employees about the 
proposal. Comment 23, available at https://www.regulations.gov/comment/OPM-2023-0005-0023. In addition to publishing the proposed 
rule in the Federal Register, at the beginning of the comment 
period, OPM shared the proposed rule with numerous stakeholders, 
including Federal employee unions, and publicized the proposed rule 
in a press release. Multiple media sources such as Forbes, CNN, 
Axios, Gov Exec, Federal News Network, and Federal Times, covered 
the publication of the proposed regulatory changes.
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    In the first section below, we discuss comments that address topics 
related to

[[Page 5739]]

the background and context of this rule, including responses to 
questions posed by OPM in the proposed rule. In the sections that 
follow, we address comments related to specific aspects of this final 
rule.

Comments Regarding Background and Context

Federal Government Pay Gaps and Occupational Segregation

    OPM has been periodically updating its pay gap data analysis since 
issuing its 2014 Governmentwide strategy.\9\ Based on September 2021 
EHRI \10\ data covering nonseasonal, full-time, permanent Executive 
branch employees, on average for all race/ethnicity groups combined, 
women are paid 94 cents for every dollar paid to a man--a gender pay 
gap of six percent. This raw, unadjusted gender pay gap is before 
considering any factors that might explain the gap, such as occupation.
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    \9\ Office of Personnel Management. ``Governmentwide Strategy 
for Advancing Pay Equality in the Federal Government.'' https://www.opm.gov/policy-data-oversight/pay-leave/reference-materials/reports/Governmentwide-Strategy-on-Advancing-Pay-Equality-in-the-Federal-Government.pdf.
    \10\ Office of Personnel Management. ``About Our Data (EHRI-
SDM).'' https://www.fedscope.opm.gov/datadefn/aehri_sdm.asp.
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    As discussed in the proposed rule, OPM also conducted an analysis 
regarding pay gaps for groups of employees identified by both gender 
and race/ethnicity. This analysis revealed that pay gaps varied 
significantly depending on the specific population. OPM found that many 
factors may contribute to the overall gender and race/ethnicity pay 
gaps in the Federal Government. In conducting its data analysis, OPM 
observed evidence of the impact of other factors, including 
occupational segregation. A November 2020 study \11\ focused on 
national pay gaps found that the gender pay gap varied significantly by 
occupation. OPM's findings regarding Federal pay gaps are consistent 
with research on pay gaps in the national workforce. Comments on OPM's 
pay gap analysis are discussed in more detail in the Regulatory 
Alternatives section.
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    \11\ Foster, T., Murray-Close, M., Landivar, L., & de Wolf, M. 
``An Evaluation of the Gender Wage Gap Using Linked Survey and 
Administrative Data,'' November 2020. https://www.census.gov/library/working-papers/2020/adrm/CES-WP-20-34.html.
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    In instances where pay disparities are found, one organization 
recommended that OPM ``require agencies to immediately scale up to 
raise lower gender and racial/ethnic median wage to match the higher 
median pay at the beginning of the fiscal year.'' Comment 64.\12\ Two 
organizations, several commenters, and an agency also suggested that 
OPM encourage agencies to conduct pay audits and raise the wages of 
individuals subject to inequitable pay disparities. See Comments 24, 
27, 29, 46, 62, 64.
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    \12\ A reference at the end of a comment quotation or paraphrase 
provides the location of the item in the public record. (i.e., the 
two-digit number associated with the location in the docket). 
Comments filed in response to the proposed rule are available at 
https://www.regulations.gov/comment/OPM-2023-0005-00nn, where nn is 
the comment number.
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    Putting aside the questions of whether, as a policy and legal 
matter, it would be appropriate and workable to have automatic pay 
adjustments to achieve a zero pay gap in median pay, OPM has no general 
statutory authority to require agencies to increase pay of current 
employees when gender and racial/ethnic pay gaps are found. We note, 
however, that there are several authorities (e.g., the Equal Pay Act, 
Title VII of the Civil Rights Act of 1964, the Americans with 
Disabilities Act, the Age Discrimination in Employment Act) under which 
an agency is authorized to increase the salary of a Federal employee 
found to be subject to an inequitable pay disparity. We also note that 
there may be legitimate, non-discriminatory factors that could 
contribute to pay disparities for selected categories of employees, 
such as employee seniority, performance, or other factors not 
controlled for in the analysis. In 2015, OPM encouraged agencies to 
conduct pay gap analyses by gender, race/ethnicity, or other 
characteristics for their own workforces to identify where potential 
pay disparities exist within an agency in order to develop targeted 
strategies to reduce disparities and has issued guidance to help 
agencies complete this exercise.\13\
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    \13\ Office of Personnel Management. ``Guidance for Agencies 
Conducting Gender Pay Data Analysis.'' https://chcoc.gov/sites/default/files/Attachment-Agency%20Gender%20Data%20Analysis%20Guidance-rev_0.pdf.
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    OPM invited comments on what factors OPM should consider for 
positions of high occupational segregation (wherein women and men often 
tend to work in different occupations, and the occupations that are 
predominantly held by women pay less, compared to those predominantly 
held by men at the same level of skill or education). Four 
organizations responded to this request for comment. One recommended 
that OPM consider race and ethnicity alongside gender when looking into 
the issue of positions of high occupational segregation. Comment 33. 
Another stated that ``[g]iven that the goal is equal pay for equal 
work, the focus of these initial steps to fight pay discrimination 
needs to be on ensuring fairness in pay setting for like positions. 
Ultimately, changes in pay between different positions will require 
modification of the classification standards used to adjust the scoring 
results, as those classification standards are the main measure OPM has 
in place for instilling uniformity in pay-setting across different 
agencies.'' Comment 49. The two other organizations recommended that 
OPM consider job evaluations. Comments 60, 61. One of these 
organizations stated that conducting job evaluations is a strategy ``to 
identify and remedy pay inequities so that women and people of color 
receive equitable compensation for their labor. Job evaluation schemes 
assess jobs across occupations on a range of factors to establish fair 
and equitable pay and promotion. These schemes make it more likely that 
pay and promotion are based on performance rather than bias.'' Comment 
61.
    Occupational segregation in both the public and private sectors is 
a systemic and persistent issue identified in pay equity studies. 
Addressing occupational segregation, however, is outside the scope of 
the Federal pay and classification system. OPM will assist agencies, in 
exercising their delegated classification authority, in collecting 
metrics and other relevant agency data to examine classification 
practices based on a variety of factors, including gender analysis by 
occupation. OPM will also assist agencies to expand the use of skills-
based hiring practices to address occupational segregation.

Pay Equity in Structured Pay Systems

    OPM invited comments on whether there is any research we should 
consider regarding the impact that structured pay systems have on pay 
equity, and the impact that pay policies that allow organizations to 
set pay above the minimum rate of the rate range for new employees 
based on specified criteria have on pay equity. OPM received two 
comments that addressed this question. First, an agency suggested that 
OPM look at agencies that have converted to pay banded systems, such as 
demonstration projects under 5 U.S.C. chapter 47, to determine the 
benefits of such systems. Comment 34. The GS, prevailing rate, ALJ, and 
AAJ pay systems are all structured with grades or work levels and 
defined steps or pay rates within each grade or work level. It would be 
difficult to draw direct comparisons between pay-setting policies for 
pay banded systems (that combine multiple grades into a single

[[Page 5740]]

work level and/or have open salary ranges instead of step rates within 
a range) and the effect on pay equity. We do not have information on 
agency pay banding policies and practices nor has OPM conducted any pay 
equity analysis on agency pay banding systems or their policies and 
practices.
    We also note that section 12(b) of E.O. 14035 requires agencies to 
review regulations and guidance and, as appropriate and consistent with 
applicable law, revise compensation practices for pay systems 
authorized outside of title 5 of the United States Code to address any 
pay inequities and advance equal pay. OPM will ask agencies to report 
any revisions to compensation practices made to implement the 
President's direction. Such reports may include information on 
beneficial compensation practices under alternative pay systems, such 
as pay banding systems.
    Second, an organization shared two sources and stated that 
structured pay systems can help address pay gaps and are essential to 
attracting and retaining a talented and diverse workforce. Comment 61. 
One article summarized how implementing transparency and accountability 
procedures reduced the extent to which women and people of color 
received lower monetary performance-based rewards.\14\ As OPM's 
regulatory changes affect certain structured pay systems with specified 
salaries rather than performance award determinations, this article is 
not directly applicable. As discussed in the proposed rule, however, we 
agree that pay transparency--as exists in Federal pay systems--can help 
reduce gender pay gaps and that written policies support agencies' 
consistent use of pay flexibilities.
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    \14\ Castilla, E. ``Accounting for the Gap: A Firm Study 
Manipulating Organizational Accountability and Transparency in Pay 
Decisions,'' Organization Science, vol 26(2), March-April 2015, 
pages 311-333.
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    The other article stated that, in developing a pay structure, 
``grades enable flexibility and internal equity in an organization by 
providing a framework in which equivalent jobs are treated equally for 
pay purposes.'' \15\ As explained in the proposed rule, the GS 
classification and pay system is designed with standardized 
classification criteria for determining the grade levels of positions, 
and each GS grade has a range of pay consisting of 10 step rates. The 
GS system has standardized pay-setting rules that help promote the 
equitable treatment among employees. The FWS has three main pay plans 
(Wage Grade (WG), Wage Leader (WL), and Wage Supervisor (WS)); the WG 
and WL pay plans have 15 grades and WS has 19. Each grade has five 
steps. The AAJ pay system has six rates of basic pay. An ALJ in level 
AL-3 also has six rates of basic pay. OPM agrees that these structured 
pay systems provide a framework that provides equal pay for work of an 
equal value, consistent with the merit system principle in 5 U.S.C. 
2301(b)(3). Because structured pay systems minimize discriminatory 
influence on pay setting, OPM is not banning consideration of prior 
Federal pay when setting pay but is requiring agencies to establish 
policies that further promote equity in pay setting. OPM expects that, 
over time, any residual pay gaps in the Federal systems will shrink.
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    \15\ Strategic Human Resource Management. ``Building a Market-
Based Pay Structure from Scratch.'' https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/buildingamarket-basedpaystructurefromscratch.aspx.
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Classification

    OPM received a few comments regarding how employees qualify for 
positions, how positions are classified, and how these decisions impact 
pay. One commenter requested that OPM require that agencies be more 
transparent about the pay for which new Federal employees qualify and 
specifically how the grade assessments are made or calculated. Comment 
04. Another commenter similarly stated that ``clearly the source of 
inequity is in grade-setting, not step-setting as this rule targets.'' 
Comment 09. A third commenter stated, ``[t]his proposed rule appears to 
consider pay setting within a grade level, but it ignores another 
primary method of pay-setting in the government--grade level.'' Comment 
20.
    Although pay is often associated with position classification, 
position classification is based solely on work performed or the core 
duties and responsibilities of a position. The classification of 
positions recognizes levels of difficulty and responsibility in terms 
of the grade levels established in law at 5 U.S.C. 5104. While these 
grade-level definitions are used to determine grades that are linked to 
ranges of basic pay rates, those definitions are not based on pay 
factors or pay relationships. All OPM GS position classification 
standards are based on the difficulty and responsibility of the work at 
each level and the qualifications required to do that work. Under 5 
U.S.C. 5107, Federal agencies are responsible for classifying their GS 
positions consistent with position classification standards issued by 
OPM. Similarly, under 5 U.S.C. 5346, agencies are responsible for 
grading their prevailing rate jobs consistent with the job grading 
standards issued by OPM. Therefore, similar or like positions and jobs 
across Federal agencies should be classified or graded in a consistent 
manner since they are evaluated against the same standards rather than 
position-to-position comparisons.
    An agency also stated that ``a proposal to cease or significantly 
limit how Federal agencies can take into account past salary history 
must be paired with a wholesale reexamination of the GS pay scale and 
how hiring managers determine which qualifications meet which GS 
levels.'' Comment 21. The GS pay structure of 15 grades and 10 steps 
within each grade is defined in statute at 5 U.S.C. 5332(a)(2) and 
rates are adjusted in accordance with 5 U.S.C. 5303. The agency also 
recommended that OPM issue revised guidance on the minimum 
qualifications associated with each grade level. In May 2022, OPM 
issued updated guidance and qualifications policy including the General 
Schedule Qualifications Operating Manual.\16\ Qualification 
requirements are aligned with classification policy for an occupational 
series. Similarly, OPM's Federal Wage System Qualifications provide 
guidance regarding the knowledge, skills, and abilities (KSAs) or job 
elements needed for jobs and provides a reference for assessing the 
qualifications of applicants for a particular grade.\17\ Candidates for 
Federal employment and/or Federal employees may qualify for Federal 
jobs based on training, experience, education, and/or other 
requirements aligned with the position. Both the Manual and the FWS 
Qualifications provide detailed information to assist with aligning the 
qualifications of a candidate with the appropriate KSAs needed for jobs 
by grade, providing consistency between candidates, within an agency, 
and between agencies.
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    \16\ Office of Personnel Management. ``Guidance Release--E.O. 
13932; Modernizing and Reforming the Assessment and Hiring of 
Federal Job Candidates.'' https://www.chcoc.gov/content/guidance-release-eo-13932-modernizing-and-reforming-assessment-and-hiring-federal-job.
    \17\ Office of Personnel Management. ``Federal Wage System 
Qualifications.'' https://www.opm.gov/policy-data-oversight/classification-qualifications/federal-wage-system-qualifications/#url=Overview.
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    A commenter also expressed concern that ``to the extent that 
agencies are limited in their ability to set pay within GS levels, they 
are more likely to adjust the GS levels such that step 1 of the offered 
GS level is closer to the market rate.'' Comment 20. OPM cautions that 
the intentional misclassification of positions to manipulate 
recruitment,

[[Page 5741]]

qualifications, and/or pay may be a prohibited personnel practice 
subject to review by the Office of Special Counsel.

Consideration of Salary History

    Executive Order 14035 directed OPM to consider, as appropriate and 
consistent with applicable law, prohibiting the use of an applicant's 
salary history to set pay or when setting pay for a Federal employee. 
OPM has authority to issue regulations governing the GS, prevailing 
rate, AAJ, ALJ, SES, and SL/ST pay systems in 5 U.S.C. 5333, 5338, 
5343, 5372, 5372b, 5376, 5382, and consistent with merit system 
principles established in law at 5 U.S.C. 2301. Relevant to this final 
rule is the requirement that all employees and candidates for 
employment receive fair and equitable treatment in all aspects of 
personnel management (5 U.S.C. 2301(b)(2)) and that equal pay should be 
provided for work of equal value, with ``appropriate consideration'' 
for both national and local rates paid by employers in the private 
sector (5 U.S.C. 2301(b)(3)).
    Throughout the proposed rule and this final rule, OPM adheres to 
these authorities and merit system principles. We have identified the 
reasons--based on OPM data, Department of Labor data, examples of state 
salary history bans and their impacts on salary equity, research 
regarding the benefits of such bans, and other information--why salary 
history should not be a consideration in the pay-setting process for 
new Government employees.
    OPM administers pay systems that have taken a variety of approaches 
to setting initial pay. The GS pay system specifically allows salary 
history as a factor to be considered when setting pay for an initial 
appointment in Federal service (or reappointment after a break in 
service). The prevailing rate pay systems allow agencies to set pay 
above a minimum rate based on ``special'' qualifications but provide no 
direction on what factors to consider when determining the step at 
which to set pay within the grade. The AAJ pay system allows agencies 
to offer an AAJ applicant with superior qualifications a higher than 
minimum rate of pay that is next above the applicant's existing pay or 
earnings, up to the maximum rate. The ALJ pay system allows agencies, 
with prior OPM approval, to pay an ALJ applicant with superior 
qualifications the rate of pay that is next above the applicant's 
existing pay or earnings up to the maximum rate. The SES and SL/ST pay 
systems provide a specific list of factors--which does not include 
salary history--that an agency must consider when setting initial pay.
    OPM has determined that salary history should no longer be 
considered in setting pay for new Federal employees entering into the 
GS, prevailing rate, AAJ, ALJ, SES, and SL/ST pay systems. Accordingly, 
OPM is modifying the regulatory language for the GS pay system by 
removing salary history as a factor to consider in setting pay for 
newly appointed employees. Similarly, OPM is adding language to the 
prevailing rate systems, AAJ, ALJ, SES, and SL/ST pay system 
regulations to detail the factors that should be considered in setting 
pay and/or to make clear that salary history is no longer a permitted 
factor.
    National unions, a local union, as well as multiple other 
organizations, Federal employees, and members of the public expressed 
strong support for many of the regulatory amendments in the proposed 
rule. One commenter reported an academic research study in which a 
description of the proposed salary history ban was shared with 1,605 
Americans and found that about two-thirds of those surveyed favored the 
policy somewhat or strongly. See Comment 58. Commenters provided 
sources of information and data arguing against using salary history in 
the pay setting process. These commenters and the cited sources 
demonstrate multiple rationales supporting OPM's decision not to permit 
continued consideration of salary history in setting initial pay. The 
main rationales presented by commenters are discussed in the following 
sections along with consideration of countervailing comments.
    Salary history does not demonstrate an individual's qualifications 
or fitness for a position. Commenters argued that past salary in a non-
Federal job is not indicative of ability to perform in the Federal 
position. One organization wrote that ``prior salary is not an accurate 
measure of a job candidate's qualifications, skill, or ability to 
perform a job,'' referencing an Issue Brief from the Women's Bureau of 
the U.S. Department of Labor (DOL). Comment 56. A union commented that 
including salary history as an allowable consideration is at odds with 
the principles reflected in the current regulations. See Comment 44. 
The commenter explained that salary history ``does not directly reflect 
either the employee's superior qualifications or the agency's special 
needs,'' noting that those are the types of interests for which OPM 
regulations allow consideration. Id.
    Another commenter also expressed concern that consideration of past 
salary information ``perpetuates the flawed assumption'' that a lower 
paid candidate is of lower quality. Comment 60. That commenter cited a 
study, which found that ``salary history is not an effective tool for 
assessing a candidate's value . . . because organizations do not 
accurately match pay to an employee's productivity'' and ``there [is] 
too much variation on the relationship between pay and performance.'' 
\18\ Id. For example, candidates who have had a break in their career 
to serve as full-time caregivers to children or other family members 
may have a salary history that is lower than market value, but the 
candidate is well-qualified to perform the duties of the position. Id. 
Several other commenters also cited the example of lower pay for 
caregivers not being indicative of lower quality employees. See, e.g., 
Comments 20, 33, 56.
---------------------------------------------------------------------------

    \18\ Adler, L. ``What's a Job Candidate Worth? Explaining 
Variation in Pay-Setting Practices, SOCARXIV (2020). https://osf.io/preprints/socarxiv/ctu8m.
---------------------------------------------------------------------------

    Commenters raised the issue that variability in current pay may 
reflect the aspects of the current employer rather than any factors 
relevant to Federal employment. For example, an organization commented 
that ``those who take lower-paying jobs, such as those at non-profits 
or state and local government . . . should not be penalized [compared 
to those working for private sector employers].'' Comment 46.
    Several commenters disagreed, contending that past pay can be 
indicative of superior skills and/or high performance. An agency 
recommended that OPM expand the criteria for determining an employee's 
salary based on qualifications to allow agencies to consider the 
``whole of the individual and their experience'' rather than banning 
agencies from considering a candidate's salary history. Comment 34.
    An individual commented that the rule was arbitrary and capricious 
because it is inconsistent with merit system principles at 5 U.S.C. 
2301(b)(1) and 2301(b)(3), calling for equal pay for work of equal 
value. Comment 28. The commenter argues that the determination of 
``relative ability, knowledge, and skills'' in ``fair and open 
competition'' means comparing individuals with others in a market, or 
competitive, economy, and that this requires a review of salary history 
because it is ``the price of a worker's labor per unit time.''
    OPM disagrees with this analysis. As an initial matter, ``fair and 
open competition'' in 5 U.S.C. 2301(b)(1) does

[[Page 5742]]

not mean the Government should compare salaries vis-[agrave]-vis others 
in a market economy. It refers to the recruitment, selection, and 
advancement of qualified individuals based on merit (as opposed to, for 
example, political favor). More significantly, OPM disagrees that 
salary history is a consistently accurate proxy for worker value. Non-
Federal employers can have widely varying compensation structures, 
policies, and funding. Lower paying jobs, such as non-profit 
organizations or entry-level professional positions, could have 
compensation packages that include non-salary benefits (e.g., more 
generous leave or childcare flexibilities) that would be difficult to 
capture by only looking at past salary. Also, many higher paying jobs 
have an expectation or requirement of longer hours (as many are exempt 
from the overtime pay provisions of the Fair Labor Standards Act), such 
that the salary per hours worked would more closely resemble that of a 
lower paying job with a lower hours expectation or requirement. See 
Comments 20, 33, 44, 62, 68. But that nuance would not be captured by 
looking only at a monetary figure. In addition, OPM's regulations 
already allow--and will continue to allow--agencies to consider several 
factors including the level, type, or quality of the candidate's skills 
or competencies.
    Agencies do not typically have access to the information that a 
previous non-Federal employer used to determine a job candidate's 
salary, whether the previous employer conducted any salary survey or 
labor market analysis when making pay-setting determinations, or how a 
candidate's employment history may have affected the previous 
employer's salary decisions. Under this final rule, agencies will set 
pay above the minimum of the rate range based on factor(s) such as the 
level, type, or quality of the candidate's skills or competencies, 
which will be more equitable and relevant than salary history.
    Salary history bans break the cycle of pay discrepancies arising 
from discrimination and inequity and have positive impacts on pay gaps. 
Commenters noted that setting starting pay based on salary history can 
contribute to inequitable pay gaps. Citing a DOL Issue Brief, an 
organization noted that salary history may ``reflect past pay 
discrimination or other factors with gender-based implications.'' 
Comment 56. Therefore, setting starting pay based on past pay can 
compound the ``effects of discrimination and inequity,'' in part 
because starting salary can affect subsequent salary increases. Id. 
That commenter, citing a Harvard Business Review study, noted that 
``nearly two-thirds'' of businesses found that pay disparities 
``stemmed from reliance on salary history.'' Id. Another commenter also 
noted that prior salary history may reflect ``prior economic downturns 
in which women and minority workers are often harder hit.'' Comment 44.
    Several commenters referenced a 2020 paper showing that 
implementing a salary history ban results in greater increases in 
salary for job changers for populations that have historically 
experienced discrimination. See, e.g., Comments 51, 56, 61.\19\ A 
Federal employee union expressed the view that the proposed approach 
would likely lead to an increase in pay for women and people of color. 
Comment 59. Another commenter argued that implementing a salary history 
ban would ``increase the diversity of our workforce and leadership.'' 
Comment 22. That commenter also argued that the proposed ban would 
``provide greater footing to women and minority groups.'' Id. A Federal 
employee-run organization commented that ``in eliminating the use of 
salary history when setting pay the Government will emphasize its 
commitment to gender and racial equality while also reducing costly 
legal challenges to pay disparities.'' Comment 62. Similarly, an 
organization commented that the proposal would help to ``ensure that 
the Federal Government is in compliance with the Equal Pay Act.'' 
Comment 56.
---------------------------------------------------------------------------

    \19\ See Bessen, James E., Chen Meng, and Erich Denk. 2020. 
``Perpetuating Inequality: What Salary History Bans Reveal About 
Wages.'' https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3628729.
---------------------------------------------------------------------------

    In contrast, an agency expressed concern that prohibiting the 
consideration of salary history was not in line with the November 2021 
Governmentwide DEIA Strategic Plan,\20\ which discouraged ``solely'' 
relying on salary history to set pay. OPM believes the rule is 
consistent with the DEIA strategic plan. The DEIA strategic plan listed 
this suggestion among many policy examples the Government could adopt 
to ensure fair outcomes. Further, the President, through E.O. 14035 and 
E.O. 14069, directs OPM to consider prohibiting setting pay based on 
salary history, which OPM has concluded is appropriate.
---------------------------------------------------------------------------

    \20\ The White House. ``Governmentwide Strategic Plan to Advance 
Diversity, Equity, Inclusion, and Accessibility in the Federal 
Workforce,'' November 2021. https://www.whitehouse.gov/wp-content/uploads/2021/11/Strategic-Plan-to-Advance-Diversity-Equity-Inclusion-and-Accessibility-in-the-Federal-Workforce-11.23.21.pdf.
---------------------------------------------------------------------------

    Many of the comments arguing that salary history bans can reduce 
pay gaps cited the experiences of states and localities, noting that 21 
states and 22 localities have enacted laws prohibiting the use of 
salary history in setting pay. See, e.g., Comments 33, 56, 59, 60, 61. 
One organization cited to data from Colorado, Nevada, and Rhode Island 
in support of implementing a prohibition on considering a candidate's 
salary history. Comment 33. Several organizations further noted, citing 
multiple studies, that these salary bans have helped narrow pay gaps. 
See, e.g., Comments 33, 60, 61. One of those organizations asserted 
that OPM's proposed changes would help bring the Federal Government in 
line with these states, localities, and private firms that have already 
taken steps to limit or ban employers from using an applicant's prior 
or current salary in determining pay. Comment 33.
    In contrast, an agency commented that, OPM should not ``ban any pay 
flexibility across the board'' based on pay gaps specific to an agency, 
to certain occupations within an agency, or a limited number of 
agencies. Comment 34. It stated that agencies with such issues should 
``seek to remedy those gaps or impose their own limits based on OPM 
authorities.'' Id. Further, some commenters questioned the existence of 
pay gaps (Comment 16) or the effectiveness of a salary history ban 
(Comments 18, 23), and argued that a salary history ban could harm 
women who earn a competitive wage (Comment 23). OPM does not believe 
that these comments warrant consideration of prior salary. The 
governing merit system principles are not unique to one agency, and OPM 
believes that eliminating consideration of prior salary is most 
consistent with those principles regardless of whether any agency or 
occupation currently has an inequitable pay gap. Additionally, even if 
a particular agency or occupation does not currently have a pay gap, 
that does not eliminate the possibility that a pay gap could develop if 
new hires have differing starting salary ranges for reasons unrelated 
to any merit system principles (including but not limited to prior 
discrimination); eliminating consideration of prior salary can help 
prevent inequities from developing in the future. No commenters 
provided data showing that a salary history ban is not an effective 
tool for eliminating inequitable pay gaps or preventing such gaps from 
occurring. OPM concludes that, based on the evidence, prohibiting 
consideration of salary history has been demonstrated to reduce pay 
gaps and, thus, is a valid tool for the Federal

[[Page 5743]]

Government to implement for these pay systems.

Additional Considerations Regarding Setting Pay

    Commenters raised several other considerations regarding the pay-
setting processes at issue in this rule.
    OPM proposed that, when setting pay above the minimum rate for an 
employee newly appointed to a GS, prevailing rate system, AAJ, and ALJ 
position, an agency would be required to consider how pay has been set 
for employees who had similar qualifications (based on the level, type, 
or quality of the appointee's skills or competencies or other qualities 
and experiences) and who have been newly appointed to positions that 
are similar to the appointee's position (based on the position's 
occupational series, grade level, organization, geographic location, or 
other job-relevant factors), if applicable. A commenter noted that 
``this may have the effect of locking in low pay and creating 
disparities across teams or across agencies.'' Comment 20. The 
commenter suggested OPM ``provide a type of pay-setting authority that 
would allow an agency to remedy this by raising the pay for current 
employees to achieve equity with incoming employees.'' Id. There is no 
statutory authority for this suggested change. For example, 5 U.S.C. 
5334 provides OPM with the authority to prescribe regulations regarding 
setting a GS employee's pay when an employee transfers from a non-GS 
position or another GS position, or upon demotion, reinstatement, 
reappointment, change in type of appointment, change in employment 
status, or change in grade. The law does not allow OPM to prescribe 
regulations regarding adjusting pay for existing employees to achieve 
equity.
    An organization recommended that ``OPM provide additional guidance, 
including examples, to agencies about what constitutes `similar work,' 
and how agencies should make determinations for employees doing 
`similar work' who have different levels of experience.'' Comment 56. 
This final rule specifies that determinations regarding whether work is 
similar would be based on the position's occupational series, grade 
level, types of duties, or other job-relevant factors. While agencies 
will be responsible for making these determinations within these 
parameters, OPM will consider the need to provide further agency 
assistance on this issue in future implementing guidance.
    Commenters noted that OPM proposed only banning the consideration 
of salary history in setting pay. Several organizations recommended 
that OPM explicitly ban agencies from asking for and discussing salary 
history with job candidates. See, e.g., Comments 33, 56, 60, 61. The 
organizations also recommended that OPM guidance should clarify that 
agencies should not instead ask about an individual's salary 
expectation and that agencies should appropriately train relevant staff 
to ensure effective implementation of OPM's proposal. Id.
    The regulations that OPM is amending relate to the factors agencies 
use in setting pay, not to agencies' conduct in the hiring process, but 
OPM agrees that agencies should not solicit salary history from job 
candidates. As an initial matter, agencies are prohibited from using 
this information, so there is simply no reason why agencies should 
request it, as there is no use for this information, if acquired. 
Moreover, doing so could suggest to a candidate that the agency 
intended to consider the information in violation of the regulation, 
which further militates against an agency from asking. Therefore, 
agencies should not request a candidate's salary history, and OPM will 
issue guidance saying the same. OPM will consider the scope and content 
of implementation guidance, trainings, and other means of sharing best 
practices following the publication of this rule.
    We note, of course, that an agency has no control over what 
information a candidate may volunteer to provide and that a candidate 
could disclose their prior salary during the interview process. In the 
event of voluntary salary disclosure, agencies will continue to be 
prohibited from considering that information to set pay, regardless of 
how they learn that information.
    With respect to candidates providing salary expectations, OPM notes 
that nothing in this rule limits candidates' ability to offer this 
information. Under this final rule, agencies can still set pay above 
the minimum rate (using factors other than salary history or a 
competing job offer). Information regarding candidates' salary 
expectations may help agencies effectively recruit and onboard these 
candidates by increasing minimum pay based on factors other than salary 
history or a competing job offer.
    An agency was concerned that not allowing Federal agencies to 
consider salary when setting initial pay ``could lead to a biased pay-
setting process and have unintended consequences.'' Comment 48. The 
commenter suggests that salary is a factor that helps to remove 
subjective bias. OPM disagrees that the changes could lead to a biased 
pay-setting process. Under the current regulations, agencies may 
consider one or more of the factors listed in the regulations when 
setting pay for a GS appointee with superior qualifications or for 
which the agency has a special need. Under the revised regulations for 
the GS pay system, agencies must consider the step at which pay has 
been set for employees who had similar qualifications and who have been 
newly appointed to positions that are similar to the candidate's 
position and at least one other factor listed in the regulations. 
Similarly, under the current prevailing rate regulations, an agency 
applying the special qualifications authority currently has no 
limitations. Under the revised regulations, OPM provides specific 
factors for an agency to consider, which will make pay setting less 
subjective and less prone to bias. Under the AAJ and ALJ pay systems, 
adjustments from the minimum rate for superior qualifications are 
currently based primarily on current pay. With the revisions in this 
final rule, AAJs and ALJs that are new to Federal employment or 
reappointed after a break in service may have pay set based on 
qualifications with consideration given to the pay received by AAJs or 
ALJs, respectively, with similar qualifications and in similar 
positions. This means that we expect a lower risk of bias because 
salary history, a factor known to perpetuate gender and racial/ethnic 
biases, is being removed from consideration.

Pay Systems Outside of Title 5

    An agency noted that the proposed revisions would not apply to pay 
systems under authorities outside of title 5 of the United States Code 
and implied that implementing these changes for the title 5 pay systems 
but not for other pay systems would result in some sort of inequity. 
Comment 52. Another agency asked whether OPM's proposed regulatory 
changes would apply to employees under the Department of Defense 
Civilian Acquisition Workforce Personnel Demonstration Project 
(AcqDemo) or Science and Technology Reinvention Laboratories (STRL). 
Comment 57. OPM proposed revising the GS, prevailing rate system, AAJ, 
and ALJ regulations because OPM has authority to regulate pay setting 
for these systems under 5 U.S.C. 5333, 5338, 5343(c), 5372(c), and 
5372b(b). The regulatory changes do not apply to AcqDemo, which is 
authorized under 10 U.S.C. 1762, or to STRL, which is authorized under 
10 U.S.C. 4121, as the Department of Defense waived provisions of title 
5 pertaining

[[Page 5744]]

to setting pay for GS employees under these demonstration projects' 
authorizing legislation and 5 U.S.C. chapter 47. See 82 FR 52104 and 87 
FR 72462.
    We note, however that under section 12(b) of E.O. 14035, the head 
of each agency that administers a pay system other than one established 
under title 5 of the United States Code must review the agency's 
regulations and guidance and, as appropriate and consistent with 
applicable law, revise compensation practices to address any pay 
inequities and advance equal pay. OPM will be requesting agency reports 
on any revisions to compensation practices made to implement the 
direction in E.O. 14035.

Impact on Recruitment

    The commenters who categorically disagreed with the proposed rule 
and those commenters who only cited opposition to portions were largely 
concerned that prohibiting agencies from using a candidate's salary 
history to set pay would hurt the Federal Government's ability to 
recruit employees, especially for occupations for which non-Federal 
salaries exceed Federal salaries. See, e.g., Comments 6, 8, 9, 18, 21, 
23, 26, 35, 52, 57, 61.
    Conversely, several commenters argued that prohibiting 
consideration of salary would improve recruitment because it forces 
consideration of more equitable factors in setting pay. See, e.g., 
Comments 17, 33, 44, 51, 56. For example, one union noted that 
eliminating salary history refocuses ``consideration on . . . factors 
such as the nature and necessity of the job to the agency, disparities 
between Federal and non-Federal salaries for similar positions'' and 
comparability to pay received by similarly qualified candidates for 
similar positions. Comment 44. An organization, citing a working paper 
summarizing a field experiment, noted that ``[r]esearch shows that when 
employers are not able to rely on salary history to set pay, employers 
collect more information from candidates and ask more substantive and 
probing questions to evaluate an applicant for the job.'' Comment 56. 
Many commenters cited as a benefit the stronger emphasis on a 
candidate's knowledge and skills. See, e.g., Comments 10, 57.
    An organization commented that changing Federal Government hiring 
practices to be more equitable ``will likely result in economy-wide 
gains as the federal government will be better able to attract and hire 
a wider pool of workers.'' Comment 33. The organization also noted that 
the revised practices could improve retention, noting that ``removing 
salary history from the application and interview process can 
contribute to a sense of a fair and equitable organization culture that 
can lead to increased retention and talent attraction'' since ``workers 
who report a sense [of] unfairness in the workplace are more likely to 
voluntarily leave their job.'' Id.
    An agency suggested that the salary history ban would improve its 
ability to recruit and retain ``highly skilled employees with specific 
technical expertise'' due to the perception of the Federal Government 
as an ideal employer. Comment 51. It argued that the ``halo effect'' of 
a salary history ban was an important tool for competing in tight labor 
markets. Id.
    OPM agrees that this rule will have a positive impact on 
recruitment and believes that any recruitment challenges resulting from 
this rule will be minimal. Agencies will still be able to set pay above 
the minimum of the rate range to recruit new employees based on other 
applicable factors. For example, one of the factors agencies will be 
able to consider when setting pay under 5 CFR 531.212(c) is whether 
there are significant disparities between Federal and non-Federal 
salaries for the skills and competencies required in the position to be 
filled.
    Several commenters, including an agency, expressed concern that the 
changes would slow down the pay-setting process or that agencies will 
be discouraged from using pay flexibilities because of the additional 
work required if use of salary history is prohibited in setting pay. 
See Comments 26, 41, 52. OPM disagrees that agencies will be 
discouraged from using the pay flexibilities that are being revised. 
Instead of being allowed to consider a candidate's salary history, an 
agency can, where a candidate's superior qualifications or an agency's 
special need merits setting pay above the minimum rate, consider one or 
more factors directly related to the position to be filled and how pay 
has been set for employees who had similar qualifications and who have 
been newly appointed to positions that are similar to the candidate's 
position, if applicable. This information should be readily available 
to agencies and will give agencies the ability to increase a 
candidate's starting pay as appropriate.

Competing Job Offers

    OPM's proposal to allow agencies to consider a competing job offer 
when setting pay within limitations specified in the proposed rule 
received a significant number of comments.
    One commenter said that it was ``arbitrary and capricious to 
propose that agencies may consider a competing offer but to ignore an 
applicant's current salary or salary history'' because ``their current 
compensation represents a competing offer to the Government's offer.'' 
Comment 20. That commenter argued that there are racial disparities 
with respect to who ``may be able to wait out longer for a competing 
[job] offer than others due to higher wealth.'' Id. Another commenter 
stated that allowing consideration of private sector job offers would 
be ``more available to beneficiaries of private sector discrimination 
than to those that have been treated unfairly, and those offers would 
precisely reflect the private sector salary history that the proposed 
rule disallows directly.'' Comment 32. A commenter expressed that 
relying on competing job offers in negotiation of pay ``only serve[s] 
to perpetuate pay disparities and should be eliminated.'' Comment 40. 
An organization commented that a competing job offer could be ``another 
reflection of past pay discrimination, bias, negotiation bias, or other 
factors with gender-based implications that are irrelevant to a 
candidate's skills, qualifications, or experience.'' Comment 56. 
Another organization stated that ``women and people of color likely 
have lower competing offers or may have none. Therefore, using this 
information to determine compensation could perpetuate inequality.'' 
Comment 61.
    An organization recommended revising the regulations ``to require 
that the competing job offer be contemporaneous to the Federal offer at 
issue, and to require that the competing job offer be bona fide (as 
certified in writing by the applicant) and not, for example, be an 
offer that is made at the request of the applicant with no real 
intention of resulting in actual hiring for the purpose of affecting 
pay-setting in the hiring agency's job offer.'' Comment 49.
    In contrast, one agency supported allowing agencies to consider 
competing job offers as necessary for the agency to compete with the 
private sector. Comment 57.
    OPM is persuaded that the same principles that apply to 
consideration of salary history apply to consideration of a competing 
job offer. A competing job offer could, itself, be based on salary 
history. And, as noted by multiple commenters, an individual's current 
pay is effectively a competing offer. Setting pay based on the factors 
enumerated in this final rule is better suited to establishing 
equitable pay than comparison to a competing offer.

[[Page 5745]]

Because of the rationales for removing consideration of salary history 
and based on the comments received, OPM is revising this element of its 
proposed rule and, in this final rule, is removing a salary documented 
in a competing job offer from the list of factors that an agency may 
consider when setting pay above the minimum rate. OPM reiterates that 
agencies will be able to consider other applicable factors when setting 
pay above the minimum rate, such as significant disparities between 
Federal and non-Federal salaries for the required skills and 
competencies.

Comments Regarding Specific Pay Systems

SES & SL/ST Pay Systems

    OPM's proposed rule explained that, although the SES and SL/ST pay 
systems are among the pay systems administered by OPM, OPM believed 
that it was not necessary to prohibit consideration of salary history 
in the SES and SL/ST pay systems because the regulations governing 
those pay systems provide a specific list of factors to consider when 
setting pay that does not include salary history. Further, the gender 
pay gap for these positions, based on September 2021 data, is less than 
one percent. OPM requested comments, however, on a wide range of topics 
to inform how OPM could best promote pay equity in its pay systems.
    OPM received several comments objecting to OPM's proposal not to 
revise SES and SL/ST pay systems and advocating that these positions be 
treated the same as those in the GS, prevailing rate, AAJ, and ALJ pay 
systems. See Comments 07, 32, 47, 56, 62. After further consideration, 
OPM agrees and is amending the regulations for the SES and SL/ST pay 
systems to make explicit that salary history and competing job offers 
cannot be considered when setting pay for new entrants to Federal 
civilian positions.
    The commenters that disagreed with excluding SES and SL/ST pay 
systems from these new rules argued that this exclusion created 
arbitrary inconsistency. Id. One commenter stated that ``exempting 
these [SES and SL/ST] positions from the strict prohibition on 
considering an applicant's salary history appears arbitrary and would 
create unnecessary inconsistencies in the regulations.'' Comment 56. 
Another commenter voiced support for the use of salary history, 
generally, describing it as ``a factor that is helpful for setting the 
starting pay'' but supported either a total inclusion or total 
exclusion of the use of salary history across pay systems, stating that 
the exclusion of SES and SL/ST ``shows prejudice in applications of 
this policy.'' Comment 07.
    Commenters also objected to the exclusion of SES and SL/ST from 
this rule on the basis that any gender/racial pay gap, even below one 
percent, should be addressed. Comments 56, 62. A Federal employee-run 
organization stated that ``[t]he salary history ban is a critical step 
towards shrinking unjust and inequitable salary gaps, which is why we 
encourage OPM to include all positions (including Senior Executive 
Service jobs) unless OPM can provide compelling reasons for their 
exclusion.'' Comment 62. Similarly, when commenting on the existing pay 
gap for SES and SL/ST positions, an organization stated that ``[a]bsent 
evidence that prohibiting consideration of salary history for SES, SL, 
and ST positions would increase the pay gap for those positions, the 
fact that the pay gap is small does not provide an adequate 
justification for failing to apply rules designed to promote equity to 
these positions.'' Comment 56. OPM did not receive any comments in 
support of this aspect of the proposed rule.
    OPM agrees with the commenters that the SES and SL/ST pay 
regulations should be revised consistent with changes being made to the 
pay-setting rules for other pay systems. Although the SES and SL/ST 
systems currently do not include salary history as a factor when 
setting pay for individuals receiving their first appointment as a 
civilian employee of the Federal Government, they also do not specify 
that the list of factors is exhaustive. That is, the SES and SL/ST pay 
regulations mandate what must be considered when setting an initial 
rate of pay--to include merit-based factors such as the nature and 
quality of the individual's experience, qualifications, 
accomplishments, and current responsibilities, which could be read to 
allow for the consideration of additional factors such as salary 
history. 5 CFR 534.404; 5 CFR 534.506. Similarly, agencies currently 
have broad discretion in setting pay for an individual being 
reappointed to the SES following a break in SES service and for 
reappointment to an SL or ST position. 5 CFR 534.404(i); 5 CFR 
534.506(c).
    OPM agrees with commenters that consideration of salary history for 
SES and SL/ST positions presents the same concerns as for the GS, 
prevailing rate, AAJ, and ALJ pay systems. Further, even though the SES 
and SL/ST pay systems do not have a significant pay gap, eliminating 
consideration of salary history information, as discussed above, is 
most consistent with merit system principles and can help prevent 
inequitable pay discrepancies from arising. Salary history also is 
unlikely to reflect an individual's qualifications or fitness for a 
position relative to the qualifications of other new appointees. 
Therefore, we are adding language to the SES and SL/ST pay regulations 
explicitly prohibiting the use of salary information for appointees who 
are entering the Federal Government for the first time and prohibiting 
the use of non-Federal salary information upon reappointment to an SES, 
SL, or ST position.
    Unlike the GS, prevailing rate, AAJ, and ALJ pay systems for which 
OPM is adding a requirement for agencies to implement policies for 
setting pay for current and former Federal employees, OPM is not adding 
a similar provision for the SES and SL/ST pay systems. The regulations 
for SES pay already require agencies to have a plan for setting and 
adjusting rates for SES members. 5 CFR 534.404(g). With respect to 
setting initial pay, plans must provide for transparency in pay 
setting, may consider the executive's scope of authority and level of 
responsibility in the agency, and must consider the distribution of pay 
rates within the SES rate range. Id. Similarly, the SL/ST pay system 
regulations require an agency to have written procedures for setting 
pay. 5 CFR 534.505. The procedures must provide for transparency in pay 
setting. Id. These written SES and SL/ST plans already address the pay-
setting issues this final rule requires agencies to develop for the GS, 
prevailing rate, AAJ and ALJ pay systems.

General Schedule Pay Setting

    OPM received a number of comments related specifically to the 
General Schedule pay system and the General Schedule regulations. While 
some of these comments implicate issues that affect each of the pay 
systems at issue in this final rule, we address the General Schedule-
specific comments here.
    An agency suggested modifying or eliminating 5 CFR 531.211(a), 
which requires that pay be set at the minimum rate. Comment 30. OPM 
cannot eliminate this regulation because it implements the law in 5 
U.S.C. 5333. The statute states, ``New appointments shall be made at 
the minimum rate of the appropriate grade'' and provides OPM with 
authority to prescribe regulations to allow setting pay above the 
minimum rate of the grade based on considerations such as existing pay, 
the candidate's unusually high or unique qualifications, or a special 
need of the Government for the candidate's services. While the statute 
authorizes regulations

[[Page 5746]]

that provide pay-setting flexibility, the default is to have pay set at 
the minimum of the grade. Also, while the statute refers to 
consideration of ``existing pay,'' it is listed as an example of what 
OPM regulations may consider. As discussed in this final rule and the 
proposed rule, OPM has determined to prohibit consideration of existing 
pay or salary history when setting pay above the minimum rate of a GS 
grade.
    An agency questioned the applicability of 5 CFR 531.212 to 
nonappropriated fund instrumentality (NAFI) employees who move to GS 
positions. Comment 52. As stated in 5 CFR 531.212(a)(4), employees who 
move from a NAFI position to a GS position with a break in service of 3 
days or less and without a change in agency are not eligible to have 
pay set under 5 CFR 531.212 because their NAFI employment is considered 
employment by the Federal Government. Such NAFI employees are covered 
by the regulations in 5 CFR 531.216, which allow consideration of a 
NAFI employee's highest previous rate when setting pay. NAFI employees 
who are not covered by 5 CFR 531.216 (i.e., those who have a break in 
service of more than 3 days or a change in agency upon movement to a GS 
position) may be eligible to have their pay set under the GS superior 
qualifications and special needs pay-setting authority at 5 CFR 
531.212, as revised by this final rule.\21\
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    \21\ OPM has a fact sheet on NAFI employees moving to GS 
positions, which is based on the law in 5 U.S.C. 5334(f).
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    An agency was concerned that OPM does not ``have the agency data to 
accurately state whether salary history was the basis for justifying 
[setting pay above step 1 in the GS system] or whether it was one of 
the other eight factors considered.'' Comment 45. The agency 
recommended ``[mandating] . . . that setting pay above step 1 cannot be 
based solely on salary history,'' that agencies ``communicate to 
applicant/candidate/selectee that they are not required to provide any 
salary history,'' and that ``OPM request the data/information they are 
lacking to make a more informed decision regarding the proposed removal 
of this factor.'' Comment 52. Another commenter also suggested that OPM 
collect more data. OPM does not believe that it is practical to ask 
agencies to submit the written documentation of their justifications to 
use the superior qualifications and special needs pay-setting authority 
that is required by 5 CFR 531.212(e) when it was used for over 9,000 GS 
employees in fiscal year 2021. In 2013, some agencies reported that 
their policy on this authority required the use of a job candidate's 
existing salary, or that existing salary must be considered when 
setting pay of a new GS employee. While OPM revised its fact sheet on 
the authority in 2015 to remind agencies that existing salary is only 
one factor an agency may use when setting pay under this authority, the 
regulations have not changed since that time so agency policies may not 
have changed either. OPM will update its guidance on setting pay to 
reflect the changes made by this final rule.
    A Federal employee-run organization ``agree[d] that it is prudent 
for agencies to consider the wages of existing comparable peers when 
setting a new employee's pay'' but encouraged ``OPM to clarify that 
agencies should not look at the actual salary a comparable peer made 
when starting, but rather the grade and step the peer was originally 
given.'' Comment 62 (emphasis added). The organization suggested 
revising 5 CFR 531.212(c)(1) to replace ``How pay has been set for'' 
with ``Which grade and step had been given to'' and replacing ``have'' 
with ``had'' in the paragraph reading ``How pay has been set for 
employees who had similar qualifications (based on the level, type, or 
quality of the candidate's skills or competencies or other qualities 
and experiences) and who have been newly appointed to positions that 
are similar to the candidate's position (based on the position's 
occupational series, grade level, organization, geographic location, or 
other job-relevant factors), if applicable.'' Id. Another organization 
similarly supported ``requiring the hiring agency to search comparative 
pay of current employees at the hiring agency when setting pay for new 
hires, with measures taken to account for differences in locality pay 
and post-hire merit-based pay increases, such as within-grade increases 
and quality step increases.'' Comment 49. The proposed rule accounts 
for the grade level and geographic location (which would account for 
differences in locality pay and other location-based payments 
applicable to GS employees) of the position. However, OPM has clarified 
in this final rule that agencies must consider the step at which pay 
has been set for employees who had similar qualifications and who have 
been newly appointed to positions that are similar to the candidate's 
position.
    Another organization commented that consideration of labor market 
factors to set a higher than minimum rate can maintain pay inequities. 
The regulations in 5 CFR 531.212 allow an agency to consider ``existing 
labor market conditions and employment trends, including the 
availability and quality of candidates for the same or similar 
positions.'' Comment 61. The organization writes that ``workers who 
enter during a competitive labor market could earn a higher wage than 
workers who perform the same job but entered during a less competitive 
labor market'' and that ``this is fundamentally at odds with the notion 
of equal pay,'' and ``when the affected workers are women or people of 
color, this approach can exacerbate gender and racial pay inequities.'' 
Id. We are not revising the regulations in response to this comment. 
This factor--which an agency has discretion to consider--recognizes 
that it may be difficult to recruit employees during a competitive 
labor market, especially when the agency has a special need for the 
candidate's services and may need to set pay at a higher rate in the 
rate range. Agencies will be required to consider how pay has been set 
for employees who had similar qualifications (based on the level, type, 
or quality of the candidate's skills or competencies or other qualities 
and experiences) and who have been newly appointed to positions that 
are similar to the candidate's position (based on the position's 
occupational series, grade level, organization, geographic location, or 
other job-relevant factors), if applicable. This required factor will 
better advance pay equity.
    A commenter asked, with respect to 5 CFR 531.212(e) for the GS pay 
system, whether it would be permissible for agencies to create a 
uniform policy by which a certain step is always assigned, such as step 
4, for candidates with similar qualifications for similar positions. 
Comment 14. The commenter suggested that this would ensure that all 
candidates that benefit from the regulation always have their pay set 
the same to reduce variability in outcomes. Id. OPM notes that agencies 
may create such policies if the agency also approves and documents each 
determination to use the authority consistent with 5 CFR 531.212(e).
    OPM proposed adding in 5 CFR 531.221 that an agency must establish 
a policy regarding use of the GS maximum payable rate (MPR) rule that 
included elements specified in the proposed rule, such as considering 
how pay has been set for employees performing similar work in the 
organization (based on the position's occupational series, grade level, 
types of duties, or other job-relevant factors). One agency suggested 
requiring agencies in most circumstances to provide a salary offer no 
lower than the highest rate of pay the employee

[[Page 5747]]

previously received in another Federal job (the employee's highest 
previous rate or HPR). OPM is not making this change. An agency's 
decision to use the MPR rule or how to set pay under the MPR rule may 
be influenced by different factors, such as budget, and under this 
final rule must reflect consideration of how pay has been set for 
employees performing similar work in support of pay equity. Under the 
regulations, agencies will list these factors in their policies. 
Agencies may establish policies under which they will always set pay at 
the employee's MPR.
    A commenter recommended additional revisions, including that OPM 
require that agencies post and maintain their MPR policies on their 
websites and that agency decisions regarding any exceptions to these 
policies be made on a centralized basis. OPM declines to add these 
requirements to the rule. OPM will be issuing implementation guidance 
separately, which will include best practices.
    The same commenter also recommended that OPM permit agencies to set 
an employee's salary up to 15 percent higher than an employee's highest 
previous rate in recognition that some Federal agencies have the 
independent statutory authority to provide benefits that are greater 
than those provided under title 5 of the United States Code to most 
Federal employees. This recommendation is beyond the scope of this 
rulemaking. This rule is not intended to address pay discrepancies 
resulting from independent agency authority to provide alternative 
compensation and benefits.

Prevailing Rate Pay Setting

    OPM did not receive any comments specific to the prevailing rate 
pay systems regulations. Accordingly, OPM is adopting its proposals 
with two changes, as described above. First, as discussed in the 
Competing Job Offers section, in this final rule, an agency will not be 
able to consider a competing job offer when setting pay for a new 
prevailing rate pay system employee. Second, we are also clarifying 
that agencies must consider the ``step'' at which pay has been set 
(instead of ``pay'') for employees who had similar qualifications and 
who have been newly appointed to positions that are similar to the 
candidate's position.

Administrative Appeals Judge Pay Setting

    Under 5 CFR 534.604, an agency may offer an AAJ applicant with 
prior Federal service a rate up to the lowest rate of basic pay of the 
AAJ pay system that equals or exceeds the employee's highest previous 
rate of basic pay in a Federal civil service position, not to exceed 
the rate of basic pay for AA-6. OPM proposed adding that an agency must 
establish a policy regarding use of this provision that includes 
elements specified in the regulations, including that the policy must 
require consideration of how pay has been set for other AAJs if the 
agency decides to use this authority.
    Also under the AAJ pay-setting regulations, an agency may offer an 
AAJ applicant with superior qualifications who is not a current Federal 
employee a higher than minimum rate when such a rate is clearly 
necessary to meet the needs of the Government. An agency may pay a 
higher than minimum rate of pay that is next above the applicant's 
existing pay or earnings, up to the maximum rate AA-6. OPM proposed 
several revisions to this authority, including allowing agencies to set 
pay at any rate within the AAJ pay system. OPM proposed adding language 
requiring an agency to document the superior qualifications of the 
applicant, the need of the Government for the applicant's services, 
consideration of how pay has been set for AAJs who had similar 
qualifications (based on the level, type, or quality of the appointee's 
skills or competencies or other qualities and experiences) and have 
been newly appointed to positions that are similar to the applicant's 
position (based on the position's occupational series, grade level, 
organization, geographic location, or other job-relevant factors), if 
applicable, and an explanation of the factors that were used to justify 
the rate at which the employee's pay is set. Factors an agency could 
consider include the success of recent efforts to recruit for the same 
or similar AAJ positions or significant disparities between Federal and 
non-Federal salaries for the skills and competencies required in the 
position to be filled. This documentation would allow an agency to 
evaluate for equity purposes how pay has been set and reconstruct the 
action if necessary.
    An organization supported OPM's proposal to require agencies to 
document the superior qualifications of AAJs when setting pay above the 
minimum rate. Comment 61.
    As discussed in prior sections, in this final rule, an agency will 
not be permitted to consider an applicant's or former AAJ's salary 
history or a salary documented in a competing job offer. OPM is 
modifying its proposed regulatory text to make clear that, when setting 
pay for a former AAJ, an agency may set pay using either the highest 
previous Federal rate of pay (which necessarily considers salary 
history) or the superior qualifications authority; however, if an 
agency uses the superior qualifications authority, then the agency may 
not consider salary history. OPM is adopting the remainder of its 
proposal without change.

Administrative Law Judge Pay Setting

    Under 5 CFR 930.205, upon appointment to a position at level AL-3, 
an ALJ is paid at the minimum rate unless the agency chooses to set pay 
at a higher rate based on prior service or superior qualifications. OPM 
proposed revising Sec.  930.205 to add that, before an agency sets pay 
based on the ALJ's highest previous Federal rate of basic pay, the 
agency must establish a policy that includes certain elements specified 
in the regulations, including that the policy must require 
consideration of how pay has been set for other ALJs if the agency 
decides to use this authority.
    OPM also proposed revisions to the regulations on setting pay based 
on the ALJ applicant's superior qualifications in Sec.  930.205. 
Agencies would be able to submit a request to OPM to set pay at any 
rate within the AL-3 level. Agencies' requests to OPM would be required 
to include: (1) the applicant's or former ALJ's superior 
qualifications; (2) how pay has been set for ALJs who had similar 
qualifications (based on the level, type, or quality of the appointee's 
skills or competencies or other qualities and experiences) and have 
been newly appointed to positions that are similar to the ALJ's 
position (based on the position's occupational series, grade level, 
organization, geographic location, or other job-relevant factors), if 
applicable; and (3) the proposed rate of basic pay and justification 
for that rate. Agencies would not be able to consider an applicant's or 
former ALJ's salary history or the salary in a competing job offer. 
Other factors an agency could consider include the success of recent 
efforts to recruit for the same or similar ALJ positions or significant 
disparities between Federal and non-Federal salaries for the skills and 
competencies required in the position to be filled. OPM also proposed 
minor revisions to reflect changes resulting from Executive Order 13843 
``Excepting Administrative Law Judges from the Competitive Service,'' 
signed July 10, 2018.\22\ For example, OPM proposed to modify the 
language of Sec.  930.202 to remove the reference to a ``certificate of 
eligibles'' to reflect that ALJ positions are now excepted service.
---------------------------------------------------------------------------

    \22\ 83 FR 32755 (July 10, 2018).

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[[Page 5748]]

    An organization noted that ``the past practice of relying upon 
salary history has, in certain instances, limited the starting salary 
potential of newly hired ALJs without fairly considering the experience 
and expertise these newly hired individuals would bring to the 
position.'' Comment 36. The organization stated it supports the goal of 
``[increasing] pay equity by removing reliance on salary history as a 
central factor for setting pay, while retaining the use of past Federal 
salary as the minimum starting salary for a newly hired ALJ with a 
history of Federal employment.'' Id. The organization also requested 
that OPM consider ``taking steps to adjust. . . the maximum salary of a 
Federal ALJ [to be] equivalent to the salary paid to a Federal 
magistrate or bankruptcy judge.'' Id. OPM is not adopting this 
recommendation. The President determines the appropriate adjustment for 
each level in the ALJ pay system by executive order. See 5 U.S.C. 
5372(b)(4).
    Another organization supported OPM's proposal to require agencies 
to document the superior qualifications of ALJs when setting pay above 
the minimum rate. Comment 61.
    As discussed in prior sections, in this final rule, an agency will 
not be able to consider an applicant's or former ALJ's salary history 
(defined as existing salary or prior salary) or a salary documented in 
a competing job offer when setting pay based on an applicant's superior 
qualifications. OPM is adopting the remaining aspects of its proposal 
without change.

Expected Impact of This Final Rule

A. Statement of Need

    OPM is issuing this rule pursuant to its authority to issue 
regulations governing the GS, prevailing rate, AAJ, ALJ, SES, and SL/ST 
pay systems in 5 U.S.C. 5333, 5338, 5343, 5372, 5372b, 5376, and 5382. 
The purpose of this final rule is to advance pay equity consistent with 
merit system principles and position the Federal Government as a model 
employer while reaping the benefits that this policy will have for the 
economy and efficiency of the Government workforce. This rule is also 
consistent with diversity, equity, inclusion, and accessibility 
principles. Based on September 2021 EHRI data covering nonseasonal, 
full-time, permanent Executive branch employees, gender and racial pay 
gaps persist. On average for all race/ethnicity groups combined, women 
are paid 94 cents for every dollar paid to a man--a gender pay gap of 6 
percent. This raw, unadjusted gender pay gap is before considering any 
factors that might explain the gap, such as occupation.
    Because salary history is not always a good proxy for worker value, 
experience, and expertise and setting pay based on a candidate's salary 
history could perpetuate a pay rate that was inequitable, the Federal 
Government is taking steps to address the treatment of salary history 
and establish policies that support equitable pay determinations 
anticipating that these policies in turn will also support certain 
economies and efficiencies for the Federal Government. Currently, 
certain regulations allow agencies to consider a candidate's salary 
history or use a competing salary offer as a factor in setting initial 
pay. Agencies are not required by OPM's current regulations to consider 
the assigned grades and steps for employees performing similar work or 
candidates who had similar qualifications, if applicable, when using 
pay-setting flexibilities. Nor are agencies required to have policies 
regarding use of an employee's highest previous Federal rate to set 
pay.
    OPM invited comments on whether there are additional ways that the 
Federal Government can be a model employer with respect to pay equity 
and received several responses. A union recommended that OPM 
``emphasize pay equity and ensure employee qualifications and the needs 
of agencies struggling to hire and retain qualified employees are both 
adequately considered in pay-setting decisions.'' Comment 44. The 
union's recommendations are generally consistent with this final rule. 
An organization recommended that OPM ``add language formally stating 
that the Federal Government intends to serve as a model employer with 
respect to pay equity. . . maintain oversight and track how these pay-
setting authorities are employed. . . [and] continue to use the General 
Schedule or other similar regimented pay schedules.'' Comment 49. We 
note that OPM's strategic plan for fiscal years 2022-2026 already 
states that ``OPM strives for the Federal Government to be a model 
employer where every Federal job provides fair pay and benefits that 
reflect the diverse needs of the workforce.'' \23\ This final rule does 
not modify OPM's current oversight responsibilities regarding the use 
of pay-setting flexibilities and does not eliminate any Governmentwide 
pay system, such as the GS system, which would require a statutory 
change.
---------------------------------------------------------------------------

    \23\ Office of Personnel Management. ``Goal 1: Position the 
federal government as a model employer.'' https://www.opm.gov/about-us/strategic-plan/goal-1-position-the-federal-government-as-a-model-employer./
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    Several commenters offered other suggestions for ways the Federal 
Government could improve pay equity. These included examining veterans' 
preference, ``performing a market analysis and paying civil servants 
fair wages,'' and shortening the required waiting period that is 
required to advance to the next higher step or rate or reducing the 
number of steps in the GS pay system or, more generally, reforming how 
agencies set pay upon promotion. Comments 58, 02, 08, 48, respectively.
    These suggestions would require a statutory change--
    <bullet> Veterans' preference is provided by 5 U.S.C. 2108 and 
2108a.
    <bullet> GS, FWS, AAJ, and ALJ pay schedules are typically adjusted 
annually as provided by the statutes that govern those pay systems, 
which include consideration of changes in the cost of labor or, in the 
case of the FWS, prevailing rates (5 U.S.C. 5303, 5304, 5304a, 5343, 
5372b, and 5372).
    <bullet> The waiting periods that are required to advance to the 
next higher step or rate and the number of steps in the GS pay system 
are specified in 5 U.S.C. 5335.
    <bullet> Pay setting upon promotion for GS employees is governed by 
5 U.S.C. 5334.
    Commenters also suggested regulating pay-banding systems more 
strictly, fully implementing the Federal Employees Pay Comparability 
Act (FEPCA) of 1990, allowing agencies to establish developmental 
programs that allow for ``retained pay'' when changing career fields, 
and providing current Federal employees with more information on 
promotions including specific benchmarks that employees must achieve to 
move between pay levels. Comments 09, 18, 34, 56, respectively.
    OPM does not administer any pay banding systems--they are 
administered by the agency that has the pay banding system under its 
independent statutory pay authority or under a demonstration project 
authority, following provisions under 5 U.S.C. chapter 47. OPM has 
prescribed criteria under 5 U.S.C. 9509 for the U.S. Department of the 
Treasury to follow in exercising its authority to establish one or more 
pay banding systems covering all or any portion of the Internal Revenue 
Service workforce.\24\ Any such system is administered by the U.S. 
Department of the Treasury and is outside the scope of this final rule.
---------------------------------------------------------------------------

    \24\ 65 FR 79433 (Dec. 19, 2000).

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[[Page 5749]]

    Several other of the above recommendations are also outside the 
scope of this final rule--
    <bullet> With regard to the FEPCA recommendation, on August 31, 
2023, the President determined that it was appropriate to exercise his 
authority to set alternative pay adjustments for 2024 pursuant to 5 
U.S.C. 5303(b) and 5 U.S.C. 5304a. These alternative pay adjustments 
mean FEPCA will continue to not be implemented fully.\25\
---------------------------------------------------------------------------

    \25\ The White House. ``Letter to the Speaker of the House and 
President of the Senate on the Alternative Plan for Pay Adjustments 
for Civilian Federal Employees.'' https://www.whitehouse.gov/briefing-room/presidential-actions/2023/08/31/letter-to-the-speaker-of-the-house-and-the-president-of-the-senate-on-the-alternative-plan-for-pay-adjustments-for-civilian-federal-employees-2/.
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    <bullet> OPM regulations at 5 CFR 536.301(a)(5) provide for 
retained pay when an agency places an employee in a formal employee 
development program that is generally utilized Governmentwide, such as 
the Recent Graduates Program. Agencies have discretion to determine 
whether to use formal employee development programs generally utilized 
Governmentwide to fill their positions.
    <bullet> Information on classification and qualifications for GS 
and FWS positions is available on OPM's website.\26\
---------------------------------------------------------------------------

    \26\ Office of Personnel Management. ``Classification and 
Qualifications.'' https://www.opm.gov/policy-data-oversight/classification-qualifications/.
---------------------------------------------------------------------------

    Commenters also suggested prohibiting applicants from placing pay 
on their resumes, prohibiting agencies from asking about gaps in 
employment, and considering how many hours a candidate works in a non-
Federal position when setting pay. See, e.g., Comments 09, 23, 60, 20.
    This final rule does not address what topics may be discussed 
during salary negotiations, including what information a job candidate 
may share with an agency on an employment application or resume, as an 
agency cannot completely control what information a job candidate may 
provide. See the `Additional Considerations Regarding Setting Pay' 
section for further discussion. Instead, this final rule focuses on the 
agency's action by removing from consideration any salary history 
information it may receive. Because OPM is requiring agencies not to 
consider salary history, the number of hours a candidate works in a 
non-Federal position becomes irrelevant, since there is no reason to 
standardize salary information (for example, annualizing a non-Federal 
hourly rate to compare with annual salaries).
    Another suggestion was to take strong disciplinary action against 
managers who discriminate when setting pay to deter deliberate pay 
discrimination from occurring. Comment 49. An employee's violation of 
an agency's regulations or policies may cause the employee's agency to 
take disciplinary or corrective action using well-established tools 
available to agencies for addressing performance issues and misconduct. 
If an individual fails to follow pay-setting policy, it could be a 
performance or misconduct issue addressable under 5 U.S.C. chapters 43 
or 75.

B. Impact

    The rule will impact pay setting for new Federal hires in the 
affected pay systems when agencies exercise discretionary authority to 
set pay within the rate range. The rule may also impact pay setting for 
current Federal employees for certain personnel actions as agencies 
review or develop policies addressing use of an employee's highest 
previous rate of pay received in a previous Federal civilian position.
    Based on data regarding non-seasonal, full-time permanent Executive 
branch employees reported to OPM's EHRI database as of September 2021, 
there were more than 1.3 million GS employees, approximately 160,000 
FWS (the largest pay system under the prevailing rate systems) 
appropriated fund employees,\27\ 8,000 SES, 900 SL positions, 400 ST 
positions, 1,700 ALJs, and 63 AAJs in the Federal Government. This 
included approximately 97,000 new hires in the GS pay system, 13,000 
new FWS appropriated fund hires, 700 new hires in the SES pay system, 
24 new SL hires, 10 new ST hires, 17 new hires in the ALJ pay system, 
and 3 new hires in the AAJ pay system.
---------------------------------------------------------------------------

    \27\ Nonappropriated fund FWS prevailing rate employees are not 
reported to EHRI.
---------------------------------------------------------------------------

    In fiscal year 2021, 9.5 percent of new GS employees (9,216 
individual pay actions/authorizations) had their pay set using the 
superior qualifications and special needs pay-setting authority in 5 
CFR 531.212. With respect to the prevailing rate pay system, agencies 
used the authority in 5 CFR 532.403(b) to set pay above the minimum 
rate of the appropriate grade for around 210 appointees with special 
qualifications. During the same period, one agency set pay above the 
minimum rate for an ALJ applicant based on their superior 
qualifications under 5 CFR 930.205(f)(2) with OPM approval.\28\ No 
agencies reported setting pay under 5 CFR 534.604 based on an AAJ's 
superior qualifications.
---------------------------------------------------------------------------

    \28\ Agencies must seek OPM pre-approval to use this pay-setting 
flexibility for ALJs. 5 CFR 930.205.
---------------------------------------------------------------------------

    Because this pay authority is delegated to agencies and agencies' 
written justifications for its use are not reported to EHRI, OPM does 
not have information regarding which factor or factors were used to 
justify the rate at which each new employee's pay is set under the GS 
superior qualifications and special needs pay-setting authority or 
similar prevailing rate, ALJ, and AAJ pay-setting authorities. As a 
result, we are not able to predict with specificity how the regulations 
will affect the rate at which pay is set for candidates based on their 
special or superior qualifications or a special agency need.
    Although OPM does not have data on the specific factors agencies 
used to justify use of these pay-setting authorities, OPM reviewed 
hiring and pay data from fiscal year 2021, which demonstrated the 
extent to which agencies set pay under the GS superior qualifications 
and special needs pay-setting authority, the occupations for which 
these pay authorities are used, and how use of these authorities varied 
by gender. Looking more specifically at the 9.5 percent of new GS 
employees (9,216 individual pay actions/authorizations) who had their 
pay set using the superior qualifications and special needs pay-setting 
authority in 5 CFR 531.212, 21.5 percent of those were authorized for 
employees in the 06XX Medical, Hospital, Dental, and Public Health 
occupational family, 17.4 percent were authorized for employees in the 
08XX Engineering and Architecture occupational family, 12.1 percent 
were authorized for employees in the 03XX General Administrative, 
Clerical, and Office Services occupational family, and 10.6 percent 
were authorized for employees in the 22XX Information Technology 
occupational family. The authority was used more frequently (on a 
percentage basis) for men than for women: 11.2 percent of non-seasonal 
full-time permanent GS new hires who were men had their pay set using 
the superior qualifications and special needs pay-setting authority, 
but only 7.9 percent of non-seasonal full-time permanent GS hires who 
were women had their pay set using the superior qualifications and 
special needs pay-setting authority.
    Of the four occupational families that had the majority of the 
superior qualifications and special needs pay-setting authorizations, 
the two occupational families that were overwhelmingly male dominated 
(08XX Engineering and Architecture and 22XX Information Technology) are 
also the occupational families that had the

[[Page 5750]]

greatest percentage of new hires with pay set under the superior 
qualifications and special needs pay-setting authority. In the 08XX 
occupational family (Engineering and Architecture), 21 percent of new 
hires were women, and 79 percent of new hires were men. About 29 
percent of new hires in the 08XX occupational family had their pay set 
using the superior qualifications and special needs pay-setting 
authority. In the 22XX occupational family (Information Technology), 24 
percent of new hires were women, and 76 percent of new hires were men. 
About 22 percent of new hires in the 22XX occupational family had their 
pay set using the superior qualifications and special needs pay-setting 
authority. Conversely, in the 06XX occupational family (Medical, 
Hospital, Dental, and Public Health), 79 percent of new hires were 
women, and 21 percent of new hires were men, but only about 9 percent 
of new hires had their pay set using the superior qualifications and 
special needs pay-setting authority. Similarly, in the 03XX 
occupational family (General Administrative, Clerical, and Office 
Services), 54 percent of new hires were women, and 46 percent of new 
hires were men, but only about 8 percent of new hires had their pay set 
under the superior qualifications and special needs pay-setting 
authority.
    OPM does not collect data on agency use of the other pay 
flexibilities that this regulation will revise (that is, the GS maximum 
payable rate rule in 5 CFR 531.221-223, the authority in 5 CFR 532.405 
to set pay for a prevailing rate employee based on their highest 
previous rate, the authority in 5 CFR 534.604 to set pay based on an 
AAJ applicant's Federal highest previous rate of basic pay, or the 
authority in 5 CFR 930.205(f)(1) to set pay based on an ALJ applicant's 
highest previous Federal rate of basic pay). Because OPM is not 
prohibiting the use of an employee's highest previous Federal rate of 
pay to set pay, OPM does not anticipate that the regulatory changes in 
this final rule will result in a change in how frequently these pay 
flexibilities are used.
    OPM invited comments on what data the Federal Government should 
consider when measuring the effects of greater pay equity achieved 
through a salary history ban, including effects on Federal worker 
turnover.
    A professional organization stated that OPM should consider 
possible data sources such as exit interviews and Equal Employment 
Opportunity Commission (EEOC) data on pay discrimination cases. Comment 
49. OPM does not collect exit interview data or data on EEO complaints, 
which are collected and maintained at agencies. An overview of the 
Federal Sector EEOC complaint process is available on EEOC's 
website.\29\ Employees can appeal agency decisions to EEOC, but such 
data would not be complete and may not be readily available. EEOC 
provides annual reports on the Federal Workforce,\30\ but it is 
summary-level data that is not specific enough to inform OPM's analyses 
of these regulatory changes. The organization also suggested that OPM 
should consider latitudinal studies across a sample of agencies to 
determine if there are differences between different hiring agencies 
and between different facilities on how frequently these authorities 
are invoked, and if there are any demographic disparities for subject 
employees in when and how these authorities are invoked. Id. As 
explained in the proposed rule, OPM analyzes the use of pay 
flexibilities by occupation and gender. OPM could also examine the use 
of pay flexibilities by racial/ethnic group. Pay flexibilities are 
discretionary so there may be differences between agencies' use of 
these authorities.
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    \29\ Equal Employment Opportunity Commission. ``Overview of 
Federal Sector EEO Complaint Process.'' https://www.eeoc.gov/federal-sector/overview-federal-sector-eeo-complaint-process.
    \30\ Equal Employment Opportunity Commission. ``Federal Sector 
Reports''. https://www.eeoc.gov/federal-sector/reports.
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    Also in response to OPM's request for comment, an agency suggested 
that the Federal Government should consider labor costs. Comment 57. 
The agency stated that ``agencies may be paying more without salary 
history'' and that ``the Federal Government should focus on career 
progression or upward mobility and associated pay increases after a 
person enters civil service rather than starting salary.'' Id. When 
completing Management Directive 715 for the EEOC, agencies already 
explore all levels of the workforce to determine if EEO groups have the 
same opportunities for career advancement.\31\ An organization 
recommended comparing the salaries of newly hired Federal employees 
after OPM's proposal is enacted, with a control group of employees that 
would have been subject to the rule had it been in effect at time of 
hire, to isolate the effects of a salary history ban on wages, pay 
equity, and worker turnover. Comment 33. As these are discretionary pay 
authorities, it would be unworkable to identify a control group of 
employees that could be appropriately compared to employees in which 
the discretionary pay authorities had been used.
---------------------------------------------------------------------------

    \31\ Equal Employment Opportunity Commission. ``Instructions to 
Federal Agencies for EEO MD-715.'' https://www.eeoc.gov/federal-sector/management-directive/instructions-federal-agencies-eeo-md-715-1.
---------------------------------------------------------------------------

C. Costs

    This rule will affect the operations of more than 80 Federal 
agencies--ranging from cabinet-level departments to small independent 
agencies--that have employees under the GS, prevailing rate, ALJ, AAJ, 
SES, and SL/ST pay systems. We estimate that this rule will require 
individuals employed by these agencies to spend time reviewing the rule 
and updating agency policies and procedures for the pay flexibilities. 
For this cost analysis, the assumed average salary rate of Federal 
employees performing this work will be the rate in 2023 for GS-14, step 
5, from the Washington, DC, locality pay table ($150,016 annual 
locality rate and $71.88 hourly locality rate). We assume the total 
dollar value of labor, which includes wages, benefits, and overhead, is 
equal to 200 percent of the wage rate, resulting in an assumed labor 
cost of $143.76 per hour.
    We estimate that, in the first year following publication of this 
final rule, compliance with this rule would require an average of 160 
hours of work by employees with an average hourly cost of $143.76 per 
hour. This would result in estimated costs in that first year of 
implementation of about $23,000 per agency, and about $1.8 million 
Governmentwide. There are costs associated with administering the pay 
flexibilities in this rule, such as surveying and comparing similar 
positions, but not necessarily an increase in administrative costs for 
agencies that are already using these pay flexibilities.
    A labor organization expressed concern that agency HR professionals 
may not have the necessary training to set pay based on the factors 
enumerated in the regulations. Comment 41. The organization recommended 
that OPM provide mandatory training and generate detailed worksheets to 
help generate justifications for pay setting. Id. OPM appreciates this 
suggestion and will consider the scope and content of implementation 
guidance, trainings, and other means of sharing best practices 
following the publication of this rule.
    Another individual commented that OPM did not account for the cost 
of the increased wages that the commenter expects will be paid out 
because of the proposal. Comment 28. The commenter suggested that the 
cost impact of the proposed rule could be in excess of $570 million if 
the rule is successful in

[[Page 5751]]

eliminating pay gaps. The commenter seems to assume that the rule would 
directly result in increases in pay for existing employees to close pay 
gaps. As noted in the prior section, the purpose of this rule is 
consistent with Executive Orders and OPM statutes and regulations, to 
remove from the pay-setting process consideration of a variable the 
agency has found to be inequitable. OPM, however, does not have 
authority to raise the pay for current employees to achieve equity with 
incoming employees. This rule does not purport to systematically 
increase existing pay and therefore cannot be the proximate cause of 
commenter's claimed increased costs to the Government.

D. Benefits

    This final regulation provides the opportunity for the Federal 
Government to experience the benefits that certain states have found 
after enacting salary history bans, which includes benefits in economy 
and efficiency such as promoting equitable pay, improving wages and job 
mobility for workers who began their careers during a recession, and 
creating hiring efficiencies such as improved recruitment and 
retention. The Federal Government may also experience benefits related 
to increased equity and fairness within the Federal workforce.
    Salary history bans can help close inequitable pay gaps that 
disadvantage women, workers of color, and workers who began their 
career during a recession. By enhancing equal treatment and 
compensation of similarly situated workers, salary history bans could 
lead to increased job satisfaction, commitment, and motivation among 
workers. This may help attract and retain a diverse and qualified 
workforce, and result in improved job performance and enhanced 
productivity for the employer. In addition to these economic gains, the 
Federal Government may see cost savings through reduced turnover, 
saving time and money from avoiding new hiring searches and new 
employee trainings. Salary history bans can also increase efficiencies 
by enhancing employers' talent pools.\32\ In addition, by curbing 
inequitable pay decisions, a salary history ban can promote the values 
of equity, human dignity, and fairness within the Federal workforce 
described in E.O. 13563. Salary history bans can also promote more 
equitable and fairer pay-setting practices that are based on workers' 
skills, experience, or meeting a special agency need and eliminate 
reliance on the pay decisions of previous employers for which there is 
no context and that may have been arbitrary or potentially 
discriminatory.
---------------------------------------------------------------------------

    \32\ National Women's Law Center. ``Asking for Salary History 
Perpetuates Pay Discrimination from Job to Job.'' March 2022. 
https://nwlc.org/wp-content/uploads/2020/12/Asking-for-Salary-History-2022.pdf.
---------------------------------------------------------------------------

    OPM invited comments on whether there is any social science 
research or other evidence OPM should consider that suggests that 
limiting reliance on salary history advances equity and/or has other 
workplace benefits including for the employer.
    Many commenters referenced a variety of social science research 
papers and data that show positive effects of salary history bans. See, 
e.g., Comments 31, 33, 56, 61, 68. One commenter shared three articles 
regarding gender differences in negotiations. The first article 
reported on an experiment that found significant gender differences 
when men and women asked for more money as compensation for playing a 
game in the absence of overt prescriptions to negotiate.\33\ Framing 
the situations as opportunities for negotiation was particularly 
intimidating to women. By contrast, framing situations as opportunities 
for asking was much less intimidating to women, as this language is 
viewed as more polite and role-consistent. The next article reported on 
an experiment that found that men benefitted more than women from 
having a strong alternative when negotiating a compensation package, 
which supported the author's hypothesis that women suffer a backlash 
from male and female negotiation partners when women negotiate 
assertively.\34\ The authors suggest that ``managers looking to reduce 
gender gaps in the workplace may want to install guidelines and 
processes to minimize the possibility that such backlash occurs.'' Id. 
The third article reported on experiments in which ``evaluators 
penalized female candidates more than male candidates for initiating 
negotiations [for higher compensation].'' \35\ These articles suggest 
that removing consideration of salary history may advance gender pay 
equity because it will help promote a level playing field between men 
and women in salary negotiations.
---------------------------------------------------------------------------

    \33\ Small, D., Gelfand, M., Babcock, L., and Gettman, H. ``Who 
Goes to the Bargaining Table? The Influence of Gender and Framing on 
the Initiation of Negotiation.'' Journal of Personality and Social 
Psychology, 2007, Vol. 3, No. 4, 600-613.
    \34\ Dallanls, J., Zlatev, J., Halevy, N., and Neale, M. ``The 
Dynamics of Gender and Alternatives in Negotiation.'' Journal of 
Applied Psychology, 2021, Vol. 106, No. 11, 1655-1672.
    \35\ Bowles, H., Babcock, L., and Lai, L. ``Social Incentives 
for Gender Differences in the Propensity to Initiate Negotiations: 
Sometimes it Does Hurt to Ask.'' Organizational Behavior and Human 
Decision Processes, 2007, Vol. 103, 84-103.
---------------------------------------------------------------------------

    An organization and an individual suggested that OPM review pay 
discrimination litigation relating to Federal employees and data 
regarding private sector pay discrimination to determine the potential 
benefit of this rule in helping to avoid a category of pay lawsuits. 
Comments 27, 62. The EEOC has a fact sheet on notable EEOC litigation 
involving pay discrimination.\36\ The commenters did not identify 
specific precedents, but OPM identified several cases that resulted in 
restrictions on considering prior salary in various contexts. In Rizo 
v. Yovino, the Ninth Circuit found that relying on prior wages when 
setting pay would perpetuate a wage disparity between men and women. 
950 F.3d 1217 (9th Cir. 2020) (en banc). In a consent decree settling a 
pay discrimination suit, a bank agreed not to inquire about applicants' 
prior earnings history during the hiring process. EEOC v. First 
Metropolitan Financial Services, Inc., 1:18-cv-177 (N.D. Miss. March 
18, 2021). Similarly, in EEOC v. Cummins, Inc., d/b/a Cummins Business 
Services, the company agreed not to rely solely on prior salary in 
determining compensation. 3:17-cv-01306 (M.D. Tenn. Mar. 29, 2019). 
EEOC v. Covenant Medical Center, Inc., resulted in a consent decree to 
equalize pay where a woman had been paid less than two male peers based 
on one man's prior salary history and the other man's negotiation of 
pay (where the woman had not been permitted to negotiate pay). EEOC v. 
Covenant Medical Center, Inc., 2:20-cv-10662 (E.D. Mich. Sept. 2, 
2020).
---------------------------------------------------------------------------

    \36\ Equal Employment Opportunity Commission. ``Fact Sheet: 
Notable EEOC Litigation Involving Pay Discrimination.'' https://www.eeoc.gov/fact-sheet-notable-eeoc-litigation-involving-pay-discrimination.
---------------------------------------------------------------------------

    Similarly, the organization referenced an academic report, which 
noted that asking candidates to disclose their salary history can 
``embed any previously encountered pay inequities into an employee's 
starting pay with a new employer.'' \37\ These cases and report provide 
further information indicating that limiting reliance on salary history 
to set pay has positive benefits.
---------------------------------------------------------------------------

    \37\ National Academies of Sciences, Engineering, and Medicine. 
``Evaluation of Compensation Data Collected Through the EEO-1 
Form.'' https://nap.nationalacademies.org/catalog/26581/evaluation-of-compensation-data-collected-through-the-eeo-1-form.
---------------------------------------------------------------------------

E. Regulatory Alternatives

    Executive Orders 12866, 13563, and 14094 direct agencies to assess 
available

[[Page 5752]]

regulatory alternatives and to select regulatory approaches that 
maximize net benefits.
    As discussed, agencies are required to set pay at the minimum of 
the rate range for new GS, prevailing rate, AAJ, and ALJ employees 
unless the agency chooses to set pay above the minimum based on one of 
the pay flexibilities that are available in regulations. To advance pay 
equity for new hires, one regulatory alternative OPM considered was 
eliminating pay flexibilities to set pay above the minimum rate of the 
applicable rate range. This option, however, would have been 
detrimental to agencies and job candidates. Agencies use pay 
flexibilities to set pay above the minimum rate to recruit candidates 
with superior qualifications or when agencies have a special need for 
the candidate's services. Agencies risk candidates rejecting employment 
if the offered salary does not meet their expectations.
    Another option was to allow agencies to set pay based on a 
candidate's salary history if provided voluntarily and without 
prompting. OPM invited comments on what the advantages and 
disadvantages would be of prohibiting Federal agencies from relying on 
prior salary history, if the candidate voluntarily provided it, and 
possible justifications for allowing an exception to the prior salary 
history prohibition. OPM asked whether such an exception would be 
consistent with the goals of this regulation. OPM received many 
comments in response.
    Most commenters were in favor of prohibiting Federal agencies from 
relying on prior salary history even if the candidate voluntarily 
provides it. One commenter stated that allowing an exception would be 
``counterproductive [to] the goal of reducing or eliminating the gender 
pay gap . . . [because] many academic studies have shown that males 
will engage in salary negotiation about four times as often as 
females.'' Comment 18. Organizations similarly commented that men are 
more likely to disclose their salaries than women.
    A commenter said that ``allowing private sector compensation to be 
considered when a candidate voluntarily supplies that information 
replicates private sector discrimination because candidates treated 
unfairly in the private sector will have no helpful salary history 
information to volunteer.'' Comment 32. A union and an organization 
stated that allowing voluntary disclosure of salary history would 
``perpetuate current inequalities in the Federal workforce.'' Comment 
44. An organization stated that allowing an exception would make the 
rule ``pointless'' and would provide ``no added independent benefit.'' 
Comment 46.
    Two organizations agreed with OPM that ``a strict prohibition on 
considering salary history allows for more effective administration of 
the regulations and avoids confusion.'' Comment 56. An organization 
stated that ``allowing reliance on voluntary disclosure would tend to 
benefit those who have sufficient awareness of Federal hiring processes 
to know that this flexibility is potentially available and is likely to 
harm those who have less extensive experience or networks, a group that 
likely disproportionately includes women, people of color, and other 
traditionally marginalized candidates.'' Comment 56. The organization 
also shared results from a study that found that women are 
disproportionately penalized for declining to disclose their salaries 
whereas men are disproportionately rewarded.\38\ Id. Another 
organization stated that reliance on prior salary is unnecessary 
because ``the Federal Government's pay-setting practices allow for 
consideration of a broad range of factors in determining appropriate 
pay setting.'' Comment 60.
---------------------------------------------------------------------------

    \38\ Payscale. ``Is Asking for Salary History . . . History?'' 
https://www.payscale.com/research-and-insights/salary-history/.
---------------------------------------------------------------------------

    One agency suggested that possible justifications for allowing an 
exception to the prior salary prohibition are that 5 U.S.C. 2301(b)(3) 
allows for ``appropriate consideration of both national and local rates 
paid by employers in the private sector'' and ``allows for 
competitiveness in hiring.'' Comment 09. The agency suggested limiting 
agencies to setting pay at the lowest step that equals or exceeds the 
candidate's salary history. Id. Another agency also stated that 
``salary history, if available, should be factored when setting initial 
pay for an external candidate'' because otherwise ``individual hiring 
managers [may] randomly select a step or salary rate'' and setting a 
candidate's salary above their salary history would result in an 
``increase in costs to taxpayers.'' Comment 57.
    We find the reasons for prohibiting Federal agencies from 
considering prior salary history even if the candidate voluntarily 
provides it more compelling than the reasons for allowing an exception 
to the prior salary history prohibition. Agencies would still be able 
to set pay above step 1 to be competitive based on factors specified in 
the regulations, including significant disparities between Federal and 
non-Federal salaries for the skills and competencies required in the 
position to be filled. OPM is retaining its proposed approach of 
prohibiting agencies from considering prior salary history even if the 
candidate voluntarily provides it.
    Lastly, OPM could maintain the status quo and not propose 
regulations to change salary determinations based on salary history. As 
explained throughout the proposed rule and this final rule, banning 
salary history as a consideration when setting pay promotes greater pay 
equity consistent with merit system principles. Because the Federal 
Government should serve as a model employer in establishing policies 
that advance pay equity, regulatory change is needed to help advance 
pay equity for Federal employees.
    In evaluating the regulatory alternatives, OPM considered the 
information it had available regarding the pay gaps in Federal 
employment. Many factors, including disparities in salary history, may 
contribute to the overall gender and race/ethnicity pay gaps in the 
Federal Government. For example, more women than men occupy positions 
classified at lower GS grades with lower pay, while more men than women 
occupy positions classified at higher GS grades with higher pay and in 
higher-paying Senior Executive Service positions. Data indicated that, 
for each GS grade, women and men had close to the same average position 
in range (average step position). Factors such as length in service, 
quality step increases, and--most significantly for this regulation--
how pay is set upon personnel actions such as appointment or promotion 
affect an employee's step position. OPM also found that the size of the 
gender pay gap varied by occupation.\39\
---------------------------------------------------------------------------

    \39\ 88 FR 30251, 30253 (May 11, 2023).
---------------------------------------------------------------------------

    OPM's findings regarding Federal pay gaps are consistent with 
research on pay gaps in the national workforce. A November 2020 study 
\40\ focused on national pay gaps and found that the gender pay gap 
varied significantly by occupation. There was no gender pay gap in some 
occupations, but gender pay gaps as large as 45 percent in others. The 
researchers found larger gender pay gaps in occupations that were more 
competitive and hazardous, occupations that reward longer hours of 
work, and those that have a larger proportion of women workers.
---------------------------------------------------------------------------

    \40\ Foster, T., Murray-Close, M., Landivar, L., & de Wolf, M. 
``An Evaluation of the Gender Wage Gap Using Linked Survey and 
Administrative Data,'' November 2020. https://www.census.gov/library/working-papers/2020/adrm/CES-WP-20-34.html.
---------------------------------------------------------------------------

    OPM's discussion in the proposed rule regarding the calculation and

[[Page 5753]]

presentation of Federal Government pay gaps received multiple comments. 
One commenter requested more detailed data, such as data by 
occupational series. Comment 15. The commenter expressed that the 
public should have access to more detailed data behind our calculations 
in the proposed rule. A national union that supported the proposed rule 
asked OPM to examine ``potential clusters of inequity, whether it is 
within certain position series or grades, or individual agencies'' as 
part of its pay equity analyses. Comment 59. An agency commented that 
the Federal Government already has a diverse workforce and that women 
earn salaries that are the same as or higher than salaries earned by 
men when comparing both genders in the same position.
    An organization cited international pay equity regulations, such as 
those in the European Union, as an example of a ``comprehensive 
approach,'' which requires reporting pay gap data in an open and 
transparent manner. Comment 31. OPM reviewed the European Union pay 
transparency regulations but concluded that requiring agencies to 
conduct and report on pay gap analyses is not within the scope of this 
rulemaking.
    Another organization had several recommendations including that 
OPM: (1) update its multivariate regression-decomposition analysis 
using 2022 or 2023 data; (2) take an intersectional approach when 
updating its analysis; (3) break out Asian and Native Hawaiian/Pacific 
Islander employees into separate groups rather than combining them; (4) 
use medians instead of means; and (5) examine worker characteristics 
including supervisory status, education level, geography, tenure, age, 
and disability status. Comment 33. An international professional and 
technical union asked OPM to ``undertake an annual review of gender-
based and racial/ethnic-based bias in median pay, matched for positions 
and seniority.'' Comment 64.
    These data analysis recommendations raise several issues that are 
beyond the scope of this rule. Certain data from EHRI is available to 
the public on FedScope.\41\ However, complete raw data is not available 
due to concerns about identifying employees at the individual 
level.\42\ OPM has been reviewing 2022 data and plans to release a 
report in the coming months that will summarize pay gap information by 
gender and race/ethnicity and will present pay gap data for key worker 
characteristics such as pay system, grade (where applicable), 
occupation, agency, and age. OPM also plans to release detailed 2022 
pay gap data with that report. OPM combines Asian and Native Hawaiian/
Pacific Islander ethnic groups due to small sample sizes. OPM uses 
average, instead of median, salaries, in part, because means are 
readily available in OPM's EHRI \43\ data system. Average salaries are 
an appropriate metric because a mean reflects the salary of all 
employees rather than focusing on a typical employee. OPM notes that 
the risks normally associated with using an average salary as a metric 
are minimal because Federal salaries have statutory pay limitations, 
which decrease the occurrence of outliers that would influence average 
salaries. Although OPM will continue to monitor and evaluate data 
regarding pay gaps based on gender or race/ethnicity, this final rule 
is not being promulgated simply to address potential pay gaps; this 
final rule is based on OPM's broader determination that eliminating 
consideration of prior salary history is the best way to implement the 
governing merit system principles.
---------------------------------------------------------------------------

    \41\ https://www.fedscope.opm.gov/.
    \42\ See the FedScope Data Release Policy at https://www.fedscope.opm.gov/download_Data%20Release%20Policy.pdf.
    \43\ Office of Personnel Management, ``About Our Data (EHRI-
SDM).'' https://www.fedscope.opm.gov/datadefn/aehri_sdm.asp.
---------------------------------------------------------------------------

F. Implementation

    OPM invited comments on what information agencies should provide on 
the pay-setting flexibilities and at what stage in the hiring process 
agencies should provide this information. A union stated that 
``information on how pay-setting flexibilities influence the final 
salary a candidate may be offered in job announcements and on agency 
websites helps candidates make better informed decisions when deciding 
whether to apply for such opportunities and what information to 
disclose during the application process.'' Comment 44. Similarly, 
several commenters recommended that OPM require agencies to provide 
this information in job announcements. Comments 44, 56. An agency 
stated that ``agencies should not solicit candidates to negotiate pay 
when hiring.'' Comment 57. An organization suggested that ``hiring 
agencies should be required to give applicants notice and the 
opportunity to submit to [the] agency pay-setting authorities 
documentation of any job offers or data on comparative pay for non-
Federal positions that the applicant may have'' at the initial offer 
stage. Comment 49. Then ``only after receipt and review of any response 
from the applicant (or the passing of the deadline with no response) 
should the hiring agency finalize the starting pay offer grade and step 
for the position being offered.'' Id. OPM appreciates the responses 
received but declines to impose specific requirements for job 
announcements. OPM will consider these comments and suggestions in 
developing recommended best practices. In addition, as discussed in the 
Competing Job Offers section, OPM is revising the regulations in this 
final rule such that an agency will no longer be able to set pay based 
on a competing job offer.
    Commenters recommended that OPM address other implementation 
issues. An agency, an organization, and a union recommended that hiring 
managers and human resources staff be trained on these regulatory 
changes. Comments 33, 41, 43. The union also recommended that OPM 
``develop a standard form that would guide HR practitioners and/or 
hiring managers in developing a well-supported justification for pay-
setting.'' Comment 41. The union suggested that agencies should provide 
service credit for the non-Federal work experience towards determining 
the step or rate at which to set the candidate's pay. Id. An 
organization suggested that OPM provide guidance ``on standards for 
what constitutes an effective comparative pay information search.'' 
Comment 49. The organization recommended that OPM ``modify the USAJOBS 
website and its standard forms for Federal job applications to 
eliminate rote requests for . . . prior salaries for non-Federal 
positions as part of detailing their employment histories.'' Id. OPM 
will review the USAJOBS website as OPM supports implementation of this 
final rule.
    This final rule covers approximately 1.5 million Federal employees 
in the GS, prevailing rate, AAJ, ALJ, SES, and SL/ST pay systems 
combined who are employed in more than 80 Federal agencies. OPM's pay-
setting regulations for the pay systems covered by this final rule 
prescribe broad criteria and limitations that agencies must apply in 
developing and implementing their own agency-specific pay-setting 
policies and procedures. OPM's regulations do not address the form or 
content of offers of employment that agencies make to candidates, nor 
do they address the process by which agencies engage with candidates. 
For these reasons, agency pay setting, job offer, and candidate 
communication policies, procedures, and practices may vary widely.
    This final rule has a 60-day effective date. OPM recognizes, 
however, that agencies may need implementing

[[Page 5754]]

guidance and additional time to modify their own policies and 
procedures and provide new instructions to their human resources 
professionals and hiring managers regarding setting pay and making pay 
offers in compliance with this final rule. To accommodate the scope of 
coverage and range of agency policies and practices this final rule 
will affect and to minimize disruptions to ongoing agency hiring 
processes where offers of pay have already been made to candidates, OPM 
is allowing additional time for agencies to implement this final rule. 
During this time, agencies should take steps to revise their policies 
and procedures. As soon as practicable, any new offers for employment 
including salary information for GS, FWS, ALJ, AAJ, SES, SL, ST 
positions and new pay-setting decisions for such positions based on an 
employee's previous Federal salary should reflect the requirements in 
this final rule. Agencies must be in full compliance with the final 
rule by October 1, 2024. OPM considers ``full compliance'' to refer to 
the pay setting decision as documented in the required justifications 
for use of these pay flexibilities--not necessarily the final 
processing of the personnel action. Therefore, these justifications 
that are approved on or after October 1, 2024, must be in full 
compliance. In accordance with 5 U.S.C. 7116(a)(7), this final rule 
cannot override any collective bargaining agreement in effect prior to 
the effective date of this regulation. Such collective bargaining 
agreement would need to come into compliance with this government wide 
regulation when the agreement is due to be renegotiated or expires.

G. Severability

    If any of the provisions of this final rule is held to be invalid 
or unenforceable by its terms, or as applied to any person or 
circumstance, it shall be severable from its respective section(s) and 
shall not affect the remainder thereof or the application of the 
provision to other persons not similarly situated or to other 
dissimilar circumstances. For example, if a court were to invalidate 
any portion of this proposed rule as finalized imposing procedural 
requirements on agencies with respect to one pay system, the other 
portions of the rule--including the portions applying to each of the 
other affected pay systems--would independently remain workable and 
valuable. In enforcing the pay equity provisions of this rule, OPM will 
comply with all applicable legal requirements.

Regulatory Flexibility Act

    The Director of OPM certifies that these regulations will not have 
a significant economic impact on a substantial number of small entities 
because they will apply only to Federal agencies and employees.

Regulatory Review

    OPM has examined the impact of this rule as required by Executive 
Orders 12866, 13563, and 14094, which direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public, 
health, and safety effects, distributive impacts, and equity). This 
rule is considered a ``significant regulatory action'' under section 
3(f) of Executive Order (12866).

E.O. 13132, Federalism

    This regulation will not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, it is determined that this final rule does not have 
sufficient federalism implications to warrant preparation of a 
Federalism Assessment.

E.O. 12988, Civil Justice Reform

    This regulation meets the applicable standards set forth in section 
3(a) and (b)(2) of Executive Order 12988.

Unfunded Mandates Reform Act of 1995

    This final rule will not result in the expenditure by State, local 
or tribal governments of more than $100 million annually. Thus, no 
written assessment of unfunded mandates is required.

Congressional Review Act

    OMB's Office of Information and Regulatory Affairs has determined 
this is not a major rule as defined by the Congressional Review Act (5 
U.S.C. 804(2)).

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35)

    This regulatory action will not impose any reporting or 
recordkeeping requirements under the Paperwork Reduction Act.

List of Subjects in Title 5 CFR Parts 531, 532, 534, and 930

    Administrative practice and procedure, Computer technology, Freedom 
of information, Government employees, Hospitals, Law enforcement 
officers, Motor vehicles, Reporting and recordkeeping requirements, 
Students, Wages.

Office of Personnel Management.
Stephen Hickman,
Federal Register Liaison.

    Accordingly, OPM is amending 5 CFR parts 531, 532, 534, and 930 as 
follows:

PART 531--PAY UNDER THE GENERAL SCHEDULE

0
1. The authority citation for part 531 continues to read as follows:

    Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Public Law 
103-89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 
Comp., p. 316; Subpart B also issued under 5 U.S.C. 5303(g), 5305, 
5333, 5334(a) and (b), and 7701(b)(2); Subpart D also issued under 5 
U.S.C. 5335 and 7701(b)(2); Subpart E also issued under 5 U.S.C. 
5336; Subpart F also issued under 5 U.S.C. 5304, 5305, and 5941(a); 
E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682; and E.O. 13106, 
63 FR 68151, 3 CFR, 1998 Comp., p. 224.

Subpart B--Determining Rate of Basic Pay

0
2. In Sec.  531.212--
0
a. Revise paragraph (c) introductory text;
0
b. Remove paragraph (c)(2);
0
c. Redesignate paragraph (c)(1) as (c)(2)(i) and paragraphs (c)(3) 
through (c)(10) as (c)(2)(ii) through (c)(2)(ix);
0
d. Add a new paragraph (c)(1) and new paragraph (c)(2) introductory 
text;
0
e. Revise newly redesignated paragraph (c)(2)(ix); and
0
f. Revise paragraph (e)(2)(ii).
    The revisions and additions read as follows:


Sec.  531.212  Superior qualifications and special needs pay-setting 
authority.

* * * * *
    (c) Pay rate determination. To determine the step at which to set 
an employee's payable rate of basic pay using the superior 
qualifications and special needs pay-setting authority, an agency must 
consider:
    (1) The step at which pay has been set for employees who had 
similar qualifications (based on the level, type, or quality of the 
candidate's skills or competencies or other qualities and experiences) 
and who have been newly appointed to positions that are similar to the 
candidate's position (based on the position's occupational series, 
grade level, organization, geographic location, or other job-relevant 
factors), if applicable; and

[[Page 5755]]

    (2) One or more of the following factors, as applicable in the case 
at hand:
* * * * *
    (ix) Other relevant factors, except that an agency may not consider 
the candidate's salary history (i.e., existing salary or prior salary) 
or a salary from a competing job offer.
* * * * *
    (e) * * *
    (2) * * *
    (ii) An explanation of the factors and supporting documentation 
under paragraph (c) of this section which were used to justify the rate 
at which the employee's pay is set. The written documentation must 
explain how the factors directly relate to the rate approved; and
* * * * *

0
3. In Sec.  531.221, add paragraph (a)(6) to read as follows:


Sec.  531.221  Maximum payable rate rule.

    (a) * * *
    (6) Before setting pay under this section, an agency must establish 
a policy on its use of the maximum payable rate rule that includes--
    (i) Designation of officials with the authority to approve and set 
pay under this section;
    (ii) Any situations in which the agency must use the authority;
    (iii) Any situations in which the agency may exercise its 
discretion in using the authority;
    (iv) Consideration of the step at which pay has been set for other 
employees performing similar work in the organization (based on the 
position's occupational series, grade level, types of duties, or other 
job-relevant factors) and any other factors the designated official(s) 
may or must consider in determining the step at which to set the 
employee's pay between the employee's entitlement under any other 
applicable pay-setting rule and the employee's maximum payable rate; 
and
    (v) Documentation and recordkeeping requirements sufficient to 
allow reconstruction of the action.
* * * * *

PART 532--PREVAILING RATE SYSTEMS

0
4. The authority citation for part 532 continues to read as follows:

    Authority: 5 U.S.C. 5343, 5346; Sec.  532.707 also issued under 
5 U.S.C. 552.

Subpart D--Pay Administration

0
5. In Sec.  532.403, revise paragraph (b) to read as follows:


Sec.  532.403  New appointments.

* * * * *
    (b) An agency may make a new appointment at a rate above the 
minimum rate of the appropriate grade in recognition of an appointees' 
special qualifications. In determining the rate at which to set the 
appointee's pay:
    (1) An agency must consider how the step has been set for employees 
who had similar qualifications (based on the level, type, or quality of 
the appointee's skills or competencies or other qualities and 
experiences) and who have been newly appointed to positions that are 
similar to the appointee's position (based on the position's 
occupational series, grade level, organization, geographic location, or 
other job-relevant factors), if applicable;
    (2) An agency may not consider the appointee's pay history (i.e., 
existing pay or prior pay) or a pay rate from a competing job offer; 
and
    (3) An agency must consider other relevant factors (e.g., the 
level, type, or quality of the appointee's skills or competencies; or 
significant disparities between Federal and non-Federal salaries for 
the skills and competencies required in the position to be filled).
* * * * *

0
6. In 532.405, add paragraph e to read as follows:


Sec.  532.405  Use of highest previous rate.

* * * * *
    (e) Before setting pay under this section, an agency must establish 
a policy regarding use of employees' highest previous rates. The policy 
must include the following elements:
    (1) Designation of officials with the authority to approve and set 
pay under this section;
    (2) Any situations in which the agency must use an employee's 
highest previous rate;
    (3) Any situations in which the agency may exercise its discretion 
in using an employee's highest previous rate;
    (4) Consideration of the step at which pay has been set for other 
employees performing similar work in the organization (based on the 
position's occupational series, grade level, types of duties, or other 
job-relevant factors) and any other factors the designated official(s) 
may or must consider in determining the step at which to set the 
employee's pay between the employee's entitlement under any other 
applicable pay-setting rule and the employee's highest previous rate; 
and
    (5) Documentation and recordkeeping requirements sufficient to 
allow reconstruction of the action.

PART 534--PAY UNDER OTHER SYSTEMS

0
7. The authority citation for part 534 continues to read as follows:

    Authority: 5 U.S.C. 1104, 3161(d), 5307, 5351, 5352, 5353, 5376, 
5382, 5383, 5384, 5385, 5541, 5550a, sec. 1125 of the National 
Defense Authorization Act for FY 2004, Pub. L. 108-136, 117 Stat. 
1638 (5 U.S.C. 5304, 5382, 5383, 7302; 18 U.S.C. 207); and sec. 2 of 
Pub. L. 110-372, 122 Stat. 4043 (5 U.S.C. 5304, 5307, 5376).

Subpart D--Pay and Performance Awards Under the Senior Executive 
Service

0
8. In Sec.  534.404--
0
a. Amend paragraph (a) by adding a sentence to the end of the 
paragraph; and
0
b. Amend paragraph (i)(1) by adding a sentence to the end of the 
paragraph.
    The revisions read as follows:


Sec.  534.404  Setting and adjusting pay for senior executives.

    (a) * * * When making a first appointment (regardless of tenure) as 
a civilian employee of the Federal Government, an agency may not 
consider the individual's salary history (i.e., existing salary or 
prior salary) or a salary from a competing job offer.
* * * * *
    (i) * * *
    (1) * * * When setting pay upon reappointment to the SES, an agency 
may not consider the individual's non-Federal salary history (i.e., 
existing salary or prior salary) or a salary from a competing job 
offer.
* * * * *

Subpart E--Pay for Senior-Level and Scientific or Professional 
Positions

0
9. In Sec.  534.506, revise paragraphs (a) and (c)(1) to read as 
follows:


Sec.  534.506  Setting a rate of basic pay upon appointment.

    (a) An authorized agency official may set the rate of basic pay of 
an individual who is not currently an SL or ST appointee of the agency 
at any rate within the applicable rate range under Sec.  534.504(a) 
upon appointment to an SL or ST position in the agency, subject to the 
requirements of this section. In setting a new senior professional's 
rate of basic pay, an agency must consider the nature and quality of 
the individual's experience, accomplishments, and any unique skills, 
qualifications, or competencies the individual possesses as they relate 
to requirements of the senior professional position and its impact on

[[Page 5756]]

the agency's performance. When making a first appointment (regardless 
of tenure) as a civilian employee of the Federal Government, an agency 
may not consider the individual's salary history (i.e., existing salary 
or prior salary) or a salary from a competing job offer. Rates of basic 
pay above the rate for level III of the Executive Schedule, but less 
than or equal to the rate for level II of the Executive Schedule, 
generally are reserved for those newly appointed senior professionals 
who possess superior leadership, scientific, professional or other 
competencies necessary to address key program and mission requirements, 
as determined by the agency through its strategic human capital 
planning process.
* * * * *
    (c)(1) Consistent with the agency's written procedures and 
paragraph (a) of this section, except as provided in paragraph (c)(2) 
of this section, an authorized agency official may set pay upon 
reappointment of a former SL or ST employee at any rate of basic pay 
within the pay range that applies to the SL or ST position under Sec.  
534.504(a). When setting pay, the agency may not consider the 
individual's non-Federal salary history (i.e., existing salary or prior 
salary) or a salary from a competing job offer.
* * * * *

Subpart F--Pay for Administrative Appeals Judge Positions

0
10. In Sec.  534.604--
0
a. Revise paragraph (b);
0
b. Redesignate paragraphs (c) and (d) as paragraphs (f) and (g), 
respectively; and
0
c. Add new paragraphs (c) and (d) and paragraph (e).
    The revision and additions read as follows:


Sec.  534.604  Pay administration.

* * * * *
    (b) Upon initial appointment, an agency must set the rate of basic 
pay of an administrative appeals judge at the minimum rate AA-1 of the 
administrative appeals judge pay system, except as provided in 
paragraphs (c), (d), and (e) of this section.
    (c) An agency must set the pay of an employee under the General 
Schedule pay system who is appointed to an administrative appeals judge 
position without a break in service at the lowest rate of basic pay of 
the administrative appeals judge pay system that equals or exceeds the 
rate of basic pay the employee received immediately prior to such 
appointment, not to exceed the rate of basic pay for AA-6. If the 
resulting basic pay increase is less than one-half of the dollar value 
of the employee's next within-grade increase, the agency must set the 
employee's rate of basic pay at the next higher rate of basic pay in 
the basic rate range of the administrative appeals judge pay system, 
not to exceed the rate of basic pay for AA-6.
    (d) An agency may offer an administrative appeals judge applicant 
with prior Federal service a rate up to the lowest rate of basic pay of 
the administrative appeals judge pay system that equals or exceeds the 
employee's highest previous rate of basic pay in a Federal civil 
service position, not to exceed the rate of basic pay for AA-6. Before 
setting pay under this paragraph, an agency must establish a policy 
that includes the following elements:
    (1) Designation of officials with the authority to approve and set 
pay under this paragraph (d);
    (2) Whether use of this authority is discretionary or mandatory;
    (3) The factors the designated officials may or must consider in 
determining the rate at which to set the applicant's pay and which must 
include consideration of the rate of basic pay set for other 
administrative appeals judges (based on the level, type, or quality of 
the appointee's skills or competencies or other qualities and 
experiences); and
    (4) Documentation and recordkeeping requirements sufficient to 
allow reconstruction of the action.
    (e) An agency may offer an administrative appeals judge applicant 
(including a former administrative appeals judge) with superior 
qualifications who is not a current Federal employee a higher than 
minimum rate up to the maximum rate AA-6 when such a rate is clearly 
necessary to meet the needs of the Government. Superior qualifications 
for applicants include, but are not limited to, having legal practice 
before the hiring agency, having practice in another forum with legal 
issues of concern to the hiring agency, or having an outstanding 
reputation among others in the field. An agency must document all of 
the following:
    (1) The superior qualifications of the applicant;
    (2) The need of the Government for the applicant's services;
    (3) Consideration of how pay has been set for administrative 
appeals judges who had similar qualifications (based on the level, 
type, or quality of the applicant's skills or competencies or other 
qualities and experiences) and who have been newly appointed to 
positions that are similar to the applicant's position (based on the 
position's occupational series, organization, geographic location, or 
other job-relevant factors), if applicable; and
    (4) An explanation of the factors which were used to justify the 
rate at which the employee's pay is set, except an agency may not 
consider the applicant's salary history (i.e., existing salary or prior 
salary) or a salary from a competing job offer.
* * * * *

PART 930--PROGRAMS FOR SPECIFIC POSITIONS AND EXAMINATIONS 
(MISCELLANEOUS)

Subpart B--Administrative Law Judge Program

0
11. The authority citation for subpart B continues to read as follows:

    Authority: 5 U.S.C. 1104(a), 1302(a), 1305, 3105, 3301, 3304, 
3323(b), 3344, 4301(2)(D), 5372, 7521, and E.O. 10577, 3 CFR, 1954-
1958 Comp., p. 219.


0
12. In Sec.  930.201, revise paragraph (e)(5) to read as follows:


Sec.  930.201  Coverage.

* * * * *
    (e) * * *
    (5) Approve personnel actions related to pay for administrative law 
judges under Sec.  930.205(c), (g), (h), and (k);
* * * * *

0
13. In Sec.  930.205--
0
a. In paragraph (e), remove the words ``paragraph (f)'' and add 
``paragraphs (f) and (g)'' in their place;
0
b. Revise paragraph (f);
0
c. Redesignate paragraphs (g) through (j) as paragraphs (h) through 
(k), respectively; and
0
d. Add a new paragraph (g).
    The revision and addition read as follows:


Sec.  930.205  Administrative law judge pay system.

* * * * *
    (f) When an applicant to an administrative law judge position at 
AL-3 has prior Federal service, the agency may set pay at a higher than 
minimum rate up to the lowest rate of basic pay that equals or exceeds 
the applicant's highest previous Federal rate of basic pay, not to 
exceed the maximum rate F. Before setting pay under this paragraph, an 
agency must establish a policy regarding use of this pay-setting 
authority that includes the following elements:
    (1) Designation of officials with the authority to approve and set 
pay under this paragraph;
    (2) Whether use of this authority is discretionary or mandatory;

[[Page 5757]]

    (3) The factors the designated officials may or must consider in 
determining the rate at which to set the applicant's pay, which must 
include how the rate of basic pay has been set for other administrative 
law judges; and
    (4) Documentation and recordkeeping requirements sufficient to 
allow reconstruction of the action.
    (g) With prior OPM approval, an agency may offer a higher than 
minimum rate, up to the maximum rate F, to an administrative law judge 
applicant or a former administrative law judge with superior 
qualifications who is eligible for appointment to a position at AL-3. 
An agency request to OPM must include:
    (1) A description of the superior qualifications (as defined in 
Sec.  930.202) of the applicant or former administrative law judge;
    (2) How pay has been set for administrative law judges who had 
similar qualifications (based on the level, type, or quality of the 
applicant's or former administrative law judge's skills or competencies 
or other qualities and experiences) and who have been newly appointed 
to positions that are similar to the administrative law judge's 
position (based on the position's occupational series, organization, 
geographic location, or other job-relevant factors), if applicable; and
    (3) The proposed rate of basic pay and a justification for that 
rate, except an agency may not consider an applicant's or former 
administrative law judge's salary history (i.e., existing salary or 
prior salary) or a salary from a competing job offer.
* * * * *

[FR Doc. 2024-01337 Filed 1-29-24; 8:45 am]
BILLING CODE 6325-39-P


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