Pay Secrecy is Illegal. Pay Transparency is On the Rise

pay secrecy vs pay transparency

Discouraging employees from discussing pay is no longer just bad practice-- it can lead to legal trouble. Why transparency is replacing pay secrecy.

Remember when it was a taboo to speak openly about one’s salary? Discussions about pay the workplace were discouraged — and sometimes outright forbidden — by many employers. But keeping silent about wage rates is no longer the norm, and employers who forbid discussions about pay are violating the National Labor Relations Act (NLRA).

The NLRA is clear about employees’ rights and employers and unions’ responsibilities as they apply to labor situations and conditions. The law protects employees’ right to talk about their organizations’ pay rates.

What the law says

On employees’ rights, the law states:

“Employees covered by the NLRA are guaranteed the right to form, join, decertify, or assist a labor organization, and to bargain collectively through representatives of their own choosing, or to refrain from such activities. Employees may also join together to improve terms and conditions of employment without a union.”

The law also, “protects the rights of employees to act together to address conditions at work, with or without a union. This protection extends to certain work-related conversations conducted on social media, such as Facebook and Twitter.”

As for employers and unions’ responsibilities, the law, “forbids employers from interfering with employees in the exercise of rights to form, join or assist a labor organization for collective bargaining, or from working together to improve terms and conditions of employment, or refraining from any such activity. Similarly, labor organizations may not interfere with employees in the exercise of these rights.”

What pay secrecy is and why it’s ending

“Pay secrecy” isn’t merely a personal privacy issue, it’s a genuine workplace policy in many companies. In organizations where pay secrecy policies are implied, management simply discourages employees from discussing their pay with coworkers. But in other organizations, pay secrecy policies are in writing, typically in employee handbooks.

These law violations, however, are coming to an end. Workers and employee advocates are demanding pay transparency, a trend led in part by tech companies and startups, bolstered by workers’ discovery of gender– and race-based wage disparities. A report by the job board Hired found that men are offered higher salaries than women 63% of the time. African-American women are paid 38% less than white men and 21% less than white women performing the same work, based on research by Lean In and the National Urban League.   

In 2017, Google employees began sharing and posting their earnings online, upending the practice of keeping pay rates “under wraps.” Revelations of pay inequality have stirred up lawsuits alleging pay discrimination against a string of firms, mostly from the tech industry.

Government action to end wage disparities also is helping to end pay secrecy. Former President Barack Obama issued two executive orders: one promoting “equal pay for equal work” aimed at bringing about greater pay transparency, and a second requiring federal contractors to release compensation data to the U.S. Department of Labor (DOL) so that any pay discrepancies can be identified.    

State and local governments have passed laws and regulations blocking employers from asking job applicants about their salary history. These mandates prevent employers from basing current wages on past pay, which for women, African Americans and others protected by anti-discrimination laws, are historically paid less than white men doing similar work. The desired result is to eliminate pay disparity when possible, which also discourages pay secrecy. So far, 13 states and 10 local governments nationwide have salary history bans, and more municipalities are expected to adopt such ordinances.

Ensuring fair pay for workers

Wage disparities occur in nearly all occupations, and factors like education, experience and skills levels can’t be discounted in configuring pay rates. But employers can take steps to ensure that their compensation packages are nondiscriminatory by:

  • Being transparent about compensation, which might include posting pay ranges by occupation where workers can access the information, as some employers do.
  • Reviewing the going pay ranges for occupations on websites such as the U.S. Bureau of Labor Statistics, taking into account differences in regional rates, education and other factors. To make this easier, check out compensation management software that takes into account all of the aforementioned factors. 
  • Not automatically agreeing to one person’s proposal in salary negotiations without considering pay ranges for the person’s occupational group.
  • Reviewing your pay practices, working with supervisors and managers on setting wage rates, flagging any pay disparities and conducting periodic audits to maintain fairness.

DOL has an Employer’s Guide on Equal Pay, with more recommendations on ensuring pay equity and contact information for additional resources.

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