Pay Secrecy Policies: That's a No-No!

If you’d rather not talk about how much money you make with your coworkers, that is certainly your business. But if your boss or coworkers have told you that discussing pay is prohibited, that’s illegal. 

Federal Law Protects Employees’ Right To Discuss Pay

Employers would love to make it unseemly or impolite to inquire about the income of others, but such information is relevant for determining if what you’re being paid is fair and equal. The National Labor Relations Act (NLRA) recognizes this and has long protected workers’ rights to communicate with each other about working conditions, including pay transparency.

The National Labor Relations Board (NLRB) makes it unlawful for an employer to “threaten employees with adverse consequences if they engage in protected, concerted activity,” which is understood to include prohibitions on pay discussions between coworkers. This law protects individual employee rights to collaborate to improve their pay and working conditions, whether a union is involved or not. 

Pay Secrecy Fosters Pay Inequity

Despite existing laws, some employers have official policies that ban discussions between employees about compensation. A 2021 Institute for Women’s Policy Research survey found that nearly half of all private sector workers reported that their employers either discouraged or prohibited discussion of wage and salary information. This is significant for its impact on wage discrimination and pay equity, in that pay practices are permitted to remain concealed.

Transparency of pay, like that in most public sector employment, has been shown to limit discriminatory pay gaps. 

Five Limits on Enforcing Federal Law on Pay Secrecy

Widespread flouting of the law persists in large part due to significant limits on the NLRA’s coverage and impact:             

1. The NLRA applies only to private-sector employees.
2. The protections afforded employees by the NLRA do not extend to supervisors, defined as “any individual having authority … to hire … or discipline other employees, or responsibly to direct them.” This exclusion leaves out a vast swath of the workforce, including many who are subject to pay disparities.
3. The NLRA permits interference with employee rights where the employer can show a “legitimate and substantial business justification,” which has been interpreted to include certain restrictions on wage discussion and pay information.
4. Enforcement lags and the process is burdensome. Claims must be brought within six months of when an employee should reasonably have known about an unfair policy (which has been interpreted as receipt of their first paycheck), and administrative backlogs cause sizeable delays.
5. Lack of teeth, even when enforced, results in limited deterrence. Remedies to wronged employees are limited to reinstatement and backpay.

State Laws on Fair Pay and Wage Transparency

The inadequacy of federal protections has brought about movements at both state and federal levels to enact more potent rules advancing fair pay and transparency.

For example, in 2013, New Jersey amended its New Jersey Law Against Discrimination (NJLAD) to prohibit retaliation against employees who seek information about equal pay, job titles, compensation information, or other employment-related data to investigate possible discrimination or a gender wage gap. The rule allows private action for damages and applies to all employees, including those not covered by the NLRA. A related component of eliminating pay disparities based on gender and race has yet to be addressed by many state laws.

The practice of private sector employers requesting salary history from job applicants has recently been identified as a critical basis for the intractability of pay gaps: Where an individual’s pay at their prior job is used as the baseline for all successive compensation (rather than salaries being set for the job title itself), historic discrepancies are allowed to continue. In 2016, Massachusetts took the national lead on this issue, enacting its Act to Establish Pay Equity, barring employers from asking about previous pay before making an employment offer.

Find an Experienced Employment Law Attorney

If you are subject to a pay secrecy policy or suspect you may have a pay discrimination claim, talk to a wage-and-hour law attorney to help you enact workplace policy and workplace rules.