It is human nature for employees to want to know how much their co-workers are paid. Even though most of us would not ask directly, compensation is often a topic at the watercooler, especially after the employer announces raises or bonuses.
To avoid the inevitable dissension and morale problems these discussions create, some employers have adopted policies restricting employees from disclosing their wages to others at work. Although generally well intentioned, these wage secrecy policies are not permissible for the reasons explained below.
Historical Federal/State Prohibitions
Both federal and state laws have given employees limited rights to share wage information for many years. The federal National Labor Relations Act (NLRA) affords private-sector employees the right to share their wage information with co-workers. And the National Labor Relations Board (NLRB) has sanctioned employers for enforcing pay secrecy provisions. In one 2013 ruling, for instance, the NLRB ordered reinstatement and two years of back pay to an employee fired for violating the employer’s policy prohibiting employees from discussing their pay. However, the NLRA protections do not apply to public-sector employees or to anyone in a “supervisor” position.
California Labor Code section 232, which was enacted in 1985, prohibits an employer from disciplining an employee for disclosing the employee’s own salary information. However, section 232 offers no protection to an employee seeking information about a co-worker’s wages. That is, Section 232 allows an employee to tell, but not to ask.
Interestingly, many employers and employees apparently have been unaware of these laws. In a 2010 survey, over 60 percent of private sector respondents reported that the discussion of wages and salaries was either formally prohibited in their workplaces or actively discouraged by their supervisors and managers.
Both the California Legislature and the federal Department of Labor have acted recently to put more force behind pay secrecy prohibitions. These changes are motivated in large part by an effort to close the gender wage gap. That is, there is a growing consensus that allowing employees to freely exchange wage information is a vital step in ensuring that woman and men are paid the same for similar work.
On January 1, 2016, California’s Fair Pay Act became effective. The Fair Pay Act amends Labor Code section 1197.5 by requiring employers to ensure employees are provided equal pay for substantially similar work. The Act expands state law in several significant ways, including by expanding the scope of jobs that can be compared for wage disparity and narrowing the criteria an employer may cite to justify any such disparities. The Act also shifts the burden of proof to justify wage discrepancies onto the employer.
The Act also contains a significant change in state law as to wage secrecy prohibitions. Employers now may not prohibit employees from disclosing or discussing their own wages or the wages of others, or from aiding other employees in exercising their rights to share salary information. California employees now have the express right to ask and tell others about their pay, and to encourage others to do the same. The new legislation also creates an additional private right of action, allowing employees to sue for violation of their rights to share pay data.
The federal government has also recently enacted a regulation that provides some employees greater rights to share wage information. The federal Department of Labor’s Office of Federal Contract Compliance Programs issued a Final Rule effective January 11, 2016, that prohibits federal contractors and their subcontractors from discriminating or retaliating against employees or job applicants for discussing their wages. The federal regulation also requires federal contractors to disseminate a “Pay Transparency Policy Statement” to their employees describing employees’ rights to exchange pay information. The statement must be included in employee handbooks (if the employer issues a handbook) and be posted where it can be seen by employees and applicants.
It is important to note that neither California’s Fair Pay Act nor the new federal regulation require employers to affirmatively disclose information regarding wages to employees or applicants. Although some employers have responded to gender wage gap concerns by voluntarily posting salary information for all employees, this level of transparency is not required by law. It can be an effective employee relations strategy, however.
Tips for Employers
Employers should ensure that they are in compliance with the new laws. California-based employers should review human resource policies and employee handbooks to eliminate any prohibitions on employee communications as to wages. Employers with federal contracts or subcontracts will need to take the additional step of disseminating notices informing employees of their rights to freely exchange salary information. Employers may also want to consider management training on this issue. Otherwise, some supervisors and managers may shut down conversations about pay, which can lead to liability for the employer, and, potentially, for the supervisor/manager as well.