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 you can’t discuss pay, that’s illegal.

There is a lot of misinformation out there about workers discussing compensation. Some employers try to keep compensation secret so they can pay some workers less than others. It’s important to understand pay secrecy laws and ensure you get the compensation you deserve. Talk to a local employment law attorney for legal advice.

Federal Law Protects Employees’ Right to Discuss Pay

Employers like to portray asking about coworkers’ income as impolite or unseemly. However, 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 employers to “threaten employees with adverse consequences if they engage in protected, concerted activity.” Protected activity includes pay discussions between coworkers. The NLRB protects individual employee rights to collaborate to improve their pay and working conditions. NLRB protections apply whether or not it involves union organizing.

In 2014, President Obama signed Executive Order 13665 to extend pay transparency laws to federal contractors. Under this executive order, federal contractors cannot discriminate against workers and applicants for discussing compensation or asking coworkers about pay rates. Federal contractors must also disclose pay transparency policies in employee handbooks.

Pay Secrecy Fosters Pay Inequity

Despite existing laws, some employers have official policies that ban compensation discussions between employees about compensation. A Institute for Women’s Policy Research survey found that about 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. With secrecy policies, pay practices can remain concealed.

Transparency of pay, like that in most public sector employment, limits 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 NLRA protections do not extend to supervisors. Supervisors include individuals having authority to hire, direct, or discipline other employees. 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 shows a “legitimate and substantial business justification.” This may include certain restrictions on wage discussion and pay information.
4. Enforcement lags and the process is burdensome. Workers must bring claims within six months of when an employee should reasonably have known about an unfair policy. This deadline is generally from receipt of their first paycheck. Administrative backlogs cause additional delays.
5. Lack of teeth, even when enforced, results in limited deterrence. Reinstatement and back pay are the limited legal remedies for wronged employees.

State Laws on Fair Pay and Wage Transparency

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

For example, in 2013, New Jersey amended its New Jersey Law Against Discrimination (NJLAD). The NJLAD prohibits retaliation against employees who seek information about equal pay, job titles, compensation information, or other employment-related data. This applies to workers investigating 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.

The practice of private sector employers requesting salary history from job applicants is a critical basis for the intractability of pay gaps. Where an individual’s pay at their prior job is the baseline for all successive compensation (rather than salaries being set for the job title itself), historic discrepancies continue.

In 2016, Massachusetts took the national lead on this issue, enacting its Act to Establish Pay Equity. The Massachusetts law bars employers from asking about previous pay before making an employment offer.

In 2023, California adopted a Pay Transparency Act, which expands pay and compensation transparency for workers and job applicants. Employers with 15 or more employees must include a pay scale for any job postings, internal or external. However, all employers must provide employees with their position’s pay scale upon request.

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 an employment attorney. An attorney can investigate your case, explain your legal options, and help you get fair compensation.

For more information about this area, see our employment law overview for employees and our labor law overview.