Employers set salary levels for many different reasons. In theory, compensation rates should be set for business reasons, such as longevity in the job, prior work experience, specialized training etc., as well as the company’s financial situation and overall compensation structures. It is not uncommon, however, to see a policy in an employer’s employee handbook that prohibits the company’s employees from discussing their compensation with other employees. Compensation information is confidential, the policies usually proclaim, and the company requires employees to refrain from such discussions. It could be that the company does not want to spark jealousies by employees learning who is being paid more, or learning that a new employee’s starting salary was sweetened above the usual starting salary, although such was done in order to entice the applicant who had an offer from another company.
Policies prohibiting pay discussions, however, are unlawful under the National Labor Relations Act, the NLRA. This act governs conduct of labor unions and the relationship between employers and their workforce, whether their employees are unionized or not. Under the NLRA, employees are permitted to join together in “concerted activities.” “Concerted” means “done or performed together or in cooperation.” (Dictionary.com.) The theory behind permitting compensation discussions among employees is that employees cannot determine whether they, as a group, are being underpaid when compared to market rates if they do not know what other employees are earning. Employees whether unionized or not have a legal right under the NLRA to join together to determine if they are being fairly paid.
Additionally, a number of states, New York for example, have prohibited employers from restricting salary discussions among employees in wage statutes such as Wage Theft Prevention Acts. The impetus behind these laws is often a concern that what are sometimes called “pay secrecy policies” hide pay disparities supposedly suffered by women and minorities. Thus, employers would be prudent to ensure that no blanket wage discussion prohibitions are implemented in their workplace.
Employers can, however, prohibit employees from discussing wage information of employees other than themselves without having that employee’s express permission. For example, a bookkeeping clerk could be privy to the compensation rates of all employees. That bookkeeping clerk may be required to keep that information confidential since the other employees’ compensation information is company operating information. That said, the bookkeeping clerk cannot be prohibited from sharing his or her own compensation information as the employee desires to do so.
Employers would be prudent to consult employment counsel to ensure their employment policies and confidentiality agreements or other documents restricting the disclosure of compensation information do not run afoul of the multiple laws that affect the workplace.