As of October 1, 2024, federal agencies can no longer consider a candidate’s past non-federal salary when setting pay for new hires to certain positions. This new restriction comes from a rule – “Advancing Pay Equity in Governmentwide Pay Systems” – finalized by the Office of Personnel Management’s (“OPM”) in January 2024. While the new rule became effective on April 1, 2024, agencies had until October 1, 2024, to become fully compliant with its requirements.
Who Will Be Impacted?
The new rule impacts positions governed by Title 5 of the United States Code, particularly General Schedule (GS) positions, prevailing rate or wage grade (WG) positions, Administrative Appeals Judge (AAJ) and Administrative Law Judge (ALJ) positions, Senior Executive Service (SES) positions, and senior-level and scientific or professional (SL/ST) positions. The rule applies to individuals receiving their first appointments as civilian employees and to the reappointments of former federal employees returning after a break in service, referred to as “new hires” in the rule and below.
What Does This Change?
The regulations governing pay for many of the covered positions set minimum rates of pay for appointees. For example, a new hire in the GS system generally begins at step 1 (the minimum rate) for the grade of the position. A new hire for a grade 12 GS position, therefore, will usually start at a GS-12, step 1. Agencies, however, can use their discretion to offer a salary above this minimum rate to some new hires. When setting this higher rate of pay, agencies can look to a number of factors, such as a candidate’s superior skills, qualifications, certifications, and, prior to OPM’s new rule, the candidate’s pay history. OPM’s new rule, however, removes pay history from the list of acceptable factors.
For other positions, such as SES positions and senior-level and scientific or professional positions, the regulations do not require agencies to set a new hire’s salary at a minimum rate. Instead, they allow the agency to set the rate within a set range considering a list of factors which, even before the new rule, did not specifically include salary history. The new rule, however, modifies the regulations to explicitly bar agencies from considering a candidate’s non-federal salary history or any competing job offers when setting the pay for new hires in these positions.
Why Does This Matter?
OPM’s stated goal for the rule is lofty; it endeavors to address persistent pay inequities within the federal government. When drafting this rule, OPM relied, in part, on 2021 data that shows that for “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.” That means, on average, a 6% pay gap persists in the Executive Branch between men and women, though it varies significantly between occupations. When factoring in race, the gap widens. According to OPM, “for the total Executive branch population in September 2022, the average Black/African American female salary was 85.1 percent of the average White male salary.” Tellingly, these gaps have persisted even in spite of the federal government’s use of structured pay systems, which are meant to increase transparency and reduce inequities.
In its justifications for the new rule, OPM drew two noteworthy conclusions: (1) salary history does not demonstrate an individual’s qualifications or fitness for a position and (2) salary history bans break the cycle of pay discrepancies arising from discrimination and inequity and have positive impacts on pay gaps.
In response to comments arguing that past pay signals a worker’s value or qualifications, OPM explained that many jobs pay lower salaries due to limited funding, such as positions at non-profit organizations, or because they offer non-salary benefits, such as generous leave programs or childcare. Further, higher-paying jobs often require employees to work longer hours and are exempt from paying for overtime. As such, employees of these high-paying jobs may have similar wages per hour worked as individuals in lower-paying jobs. OPM reasoned that, because agencies cannot know, nor can they be expected to parse out the differences between non-salary benefits, they cannot broadly rely on salary history to determine a potential worker’s expertise, value, or experience.
In recognizing the power of salary history bans in addressing pay gaps, OPM acknowledged that these bans are an important and effective tool in disrupting cycles of pay discrepancies. Pay inequities continue to exist across occupations and industries. Thus, an individual’s salary history “may reflect past pay discrimination” based on any number of factors. These inequities compound as current salaries are based on suppressed past pay, lowering an individual’s income not because of poor performance or low productivity but because of persistent inequality.
The Rule Has Significant Limitations
While OPM’s new rule is a step in the right direction to address persistent pay inequities and advance equal pay in the federal government, its reach is limited. The new rule only applies to new hires to positions covered by Title 5 and, further still, only to those who the agency would like to offer a salary above the standard minimum pay rate. It also does not prevent agencies from considering a candidate’s prior federal pay when setting salaries. OPM reasoned that “structured pay systems minimize discriminatory influence on pay setting” and, therefore, past federal pay can be considered without the risk of continuing inequities. However, it is clear from the final rule that inequities persist in the federal government and structured pay systems are not sufficient to completely eliminate these disparities. Therefore, OPM’s assumption appears to be a shortcoming that will ultimately prevent it from reaching its stated goal.
Finally, this rule cannot be used to rectify current inequities. In the final rule, OPM notes that it “has no general statutory authority to require agencies to increase pay of current employees when gender and racial/ethnic pay gaps are found.” Put differently, OPM has not taken steps to address current inequities, even ones that may have roots in lingering inequalities.
OPM’s new rule is important because it recognizes the subtle ways in which pay inequities can persist even in fixed-rate systems. It also marks a substantial effort by the federal government to attempt to address these lingering inequities. OPM is hopeful that the rule will significantly reduce inequalities and “expects that, over time, any residual pay gaps in the Federal systems will shrink.” Whether OPM’s optimism will lead to tangible results on the ground, however, remains to be seen.
If you believe that your employer has discriminated against you, KCNF may be able to help. Contact us for a consultation.
(This article also appeared on Law360 on November 7, 2025)