Pay Secrecy – Do You Know the Law?

The National Labor Relations Act (NLRA), also known as the Wagner Act, severely limits employers who want to prevent employee pay discussions. Many companies prefer that their employees not discuss their pay with other employees and adhere to a strict pay secrecy code. Once, face-to-face discussions were the primary concern, but technology has expanded the communication options, and remote work has redefined the workplace. Employees can email, text, post on social media, hold Zoom meetings and employ other communication channels like the Slack app to participate in protected concerted activity.   

The National Labor Relations Board (NLRB) and the courts have dealt many times with the issues of protected concerted activity, what constitutes legal communication among employees, and employer rights to limit the use of the workplace and employer-provided communication resources for non-work discussions. These issues never die, though, because the interpretations of the NLRA in various areas are frequently reversed when NLRB membership changes, usually along party lines. This is what is happening now, and it's likely that your ability to limit pay discussions among employees while using your IT equipment in any location will be restricted. 

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What are the Arguments for Pay Secrecy? 

Employers have many reasons to stop employees from discussing their pay with coworkers or publicly. Managers worry that employees may become jealous or feel unfairly compensated when wage data becomes known. They argue that two employees with similar job duties and different salaries may still be fairly compensated. These workers may not understand how their performances, specific job duties, individual experiences, and education affect their salary calculations. Some employees will look for employment elsewhere if they perceive pay inequity, true or not. 

Complicating the discussion on pay secrecy are labor unions that encourage workforce unhappiness. They want employees to discuss their pay grievances because it gives them early access to information to pursue another avenue for starting union organizing. Several employees posting pay comparisons on social media and discussing the unfairness of wages are easy targets for union representatives. Labor unions claim pay secrecy enables employers to maintain pay inequities. They also claim employers want pay confidentiality because it could cost the company more money if forced to raise some employee wages.  

Despite the arguments against allowing salary and wage discussions between employees, employers who violate the NLRA's guidelines on pay secrecy can be subject to penalties issued by the National Labor Relations Board (NLRB).   

What Are "Pay Secrecy" Policies? 

Pay secrecy or pay confidentiality rules, also known as PSC rules, prohibit employees from discussing their wages with other employees. These rules can be written, verbal, or implied, though having a written rule in the employee handbook reviewed by a labor law attorney is highly recommended. Verbal and implied rules are more vulnerable to misapplication.  

There are also pay confidentiality rules that prevent employees, like Human Resources employees who have access to other employees' compensation data, from discussing that information with other employees. You can't share another employee's pay with others when you have access to the information as a job responsibility. Those PSC rules are considered legal and clear and are not the subject of this article.   

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Who Does the NLRA Protect? 

PSC rules are covered by Section 7 of the National Labor Relations Act (NLRA). The NLRA prohibits employers from limiting the activities of employees related to "collective bargaining or other mutual aid or protection." It protects the rights of most union or non-union employees to engage in concerted protected activity, which the NLRB interpreted in the case of NLRB v Brookshire Grocery Co., 919 F.2d 359 (5th Circuit, 1990) to say includes openly talking about pay

Though the NLRA applies to private-sector employers, President Obama signed Executive Order 13665 in 2014 to extend federal employees' protection. The reason is that he believed when employees are prohibited from discussing compensation, it's more likely that compensation discrimination will persist. This is the same reasoning being used by people pushing for pay transparency in the private sector to pursue gender and diverse employee pay equity. 

In 1997, the NLRB held, and the federal courts affirmed that employee discussion concerning wages is protected concerted activity per Section 7 of the NLRA. This meant coworkers could discuss pay without having to demonstrate it concerned pay discrimination, and employers couldn't put rules in place prohibiting discussion.  

Even if an employee signs a nondisclosure agreement, they can still legally talk about their compensation. A nondisclosure agreement is a confidentiality contract that requires two or more people to keep specified information a secret. A nondisclosure agreement can't include any provision that prohibits discussing pay. NLRA's pay secrecy policies are part of larger free speech protections. The NLRA is written to allow workers to discuss topics that impact them at work.  

If an employee is disciplined for talking about their pay, they can contact the regional NLRB office and lodge a formal complaint as an Unfair Labor Practice (ULP). The NLRB will evaluate the complaint and may open a case against the employer. 

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What Are the Limitations of the Pay Secrecy Laws? 

The pay secrecy portions of the NLRA have a few significant limitations. It limits who is considered an employee: independent contracts, agriculture workers, and supervisors are not treated as employees. Businesses subject to the Railway Labor Act and local, state, and federal government employees are also not subject to the NLRA. However, all federal employees, as mentioned, fall under EO 13665, which gives them the equivalent of NLRA rights to discuss pay.  

If employees are only complaining about pay and are not discussing pay as part of a concentrated effort to gain useful information, their speech may not be protected under the NRLA. 

Employers cannot prohibit employees from discussing any conditions of employment, including pay, on their own time. Any employee is allowed to share their wage amount with other employees or anyone else for that matter. An employee can't go to Human Resources and demand to know what someone else is paid. That is considered confidential information.  

It makes a difference as to how the wage information is obtained. Employees can share their own wages and talk about other people's wages if the information was obtained through conversations with the people. An employee can't talk about the wages of others if they got the information from sources that are supposed to be kept confidential, like payroll records or HR files, and you have taken steps to keep the information confidential.  

Singling pay discussions out for prohibition during work time while allowing employees to talk about other non-work topics can be interpreted as an intent to violate Section 7 employee rights. It's the same principle that's applied to posting union meeting notices on a bulletin board. You can't allow employees to post notices about social club meetings or other non-work items, for example, but prohibit union meeting notices. Consistency in enforcing the company policy is critical, a principle related to the totality of circumstances the NLRB takes into consideration when making decisions. 

The Verge reported that Apple blocked its employees from creating a Slack channel that was going to be used to discuss pay equity. The justification for the blocking was that a company policy didn't allow for Slack channels to be used for any activities or hobbies that were not Apple Employee clubs or Diversity Network Associations. The problem for Apple was that the company policy wasn't enforced when other channels were created that were devoted to non-work topics like "fun dogs."  

Can Employees Use Employer IT Resources to Discuss Pay? 

Employers are challenged to keep up with NLRB, Administrative Law Judge decisions, and Executive Orders concerning pay equity discussions, including where and how they take place. For example, during the Trump administration, the NLRB decided in the Rio All-Suites case that "employees have no statutory right to use employer equipment, including information technology resources, for Section 7 purposes." However, if you allow employees to violate a company policy unless it's something you don't want them talking about, like labor unions or wages, then you are likely to be held in violation of Section 7 of the NLRA. 

As mentioned earlier, the NLRB is politicized in that it supports White House policies, and the current NLRB's General Counsel, Jennifer Abruzzo, has made it clear that she supports unions and workers first. She issued a memo in August 2021 indicating the potential to overturn Rio All-Suites and return to the decision in Purple Communications, which held that employer workplace rules prohibiting employees access to the company email systems for non-work communications are invalid. The email system became the new natural gathering place for employees.  

Complicating the whole discussion is that the Rio All-Suites case did have the caveat that employees can use employer equipment if it is the "only reasonable means" of employee communication. The pandemic led to more employees regularly working at home or in other remote places, meaning they could only interact using IT equipment. Digital communication sources have become the new breakroom or public workspace for employee chats.   

Where is "at work" when people are working remotely using employer technologies? Before the Rio-All-Suites decision, there was a presumption that an employer who gives employees access to IT resources must allow them use of the same resources, when not working, for concerted protected activity unless there are "substantial functional justifications" for putting restrictions in place. Should the NLRB return to Purple Communications, it will reopen the door for your onsite and remote employees to freely discuss pay using your IT resources. But how will non-work time be defined when people are working at home on flexible schedules? It could get very complicated.  

Penalties for Violating the NLRA Laws 

Businesses that violate the NLRA can expect to pay back wages to affected workers, rehire workers that were fired due to violating an illegal PSC rule and rescind pay secrecy policies. The NLRB may also require that businesses post signs explaining that workers have the right to discuss pay at work. For employers that have federal contracts, the 2014 Non-Retaliation for Disclosure of Compensation Information executive order mentioned earlier as EO 13665 allows the government to withdraw federal contracts and fine corporations who have a pay secrecy policy that violates NRLA policies.   

Even if a company complies with NLRB policies that limit any corporate pay secrecy policies, it should not overlook state labor laws. Nineteen (and counting) states and Washington D.C. have equal pay and pay transparency policies that extend further rights to workers and limit the ability of businesses to control whether workers can discuss their compensation.  

labor law pay secrecy

What Should Employers Do? 

As an employer, you can't prohibit or discipline employees who talk about their pay on their own time. The best approach to avoid pay secrecy violations centers on quality communication with employees

  • Develop a clearly written compensation policy that explains how wages are decided and the pay secrecy policy. 
  • Establish a procedure that allows employees to be heard when they believe their wages are not fair in relation to coworkers. The procedure would serve as a complaint resolution path. Employees need to understand how a compensation system works to limit wage discussions.  
  • Communicate the positive aspects of the policies on wages and benefits, including merit increases, advancement opportunities, comparison to competitor wages, open-door policies, and anything else of importance. You can establish an employee website that reinforces this information. 

Any attempt to institute a pay secrecy policy should start with a visit to a labor attorney who can advise management. Case law continues to evolve on this topic, and some companies have successfully argued that their pay secrecy policies are legal. However, despite the prevalence of PSC rules in private businesses, many of them are actually illegal. To avoid possible fines, lost government contracts, and other penalties, employers should review any PSC rules to ensure they meet the letter of the law. 

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About the Author Jennifer Orechwa

With over 25 years in the industry, and now as IRI's Director of Business Development, Jennifer has gained a unique perspective on what it takes to build a culture of engagement. By blending a deep understanding of labor and employee relations with powerful digital marketing knowledge, Jennifer has helped thousands of companies achieve behavioral change at a cultural level.

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