Many employers restrict their employees from conversations about pay at the office, but is this legal?
It is a common practice in many companies for the employee policy manual to contain some verbiage about not discussing compensation and pay with other employees. This policy is easily agreed to by the employees and thus the company has achieved its goal of keeping the often times illegal practice of pay secrecy in place.
Is Pay Secrecy Illegal?
In 1935, Congress passed a law entitled, the National Labor
Relations Act or the “Wagner Act”. Under this act, private-sector employees have
the right to engage in “concerted activities for the purpose of collective
bargaining or other mutual aid or protection.” For this reason, restricting
private-sector employees from discussing their compensation with one another is
illegal. There is a limit as to who can discuss pay with other employees.
Supervisors, for example, would not be considered an “employee” and therefore
they can be prohibited from discussing pay. In addition, employees who have
access to a company’s payroll could also be prohibited from sharing other
employee’s private salary information.
Why is the Wagner Act in Place?
Is Pay Secrecy Illegal?
In 1935, Congress passed a law entitled, the National Labor
Relations Act or the “Wagner Act”. Under this act, private-sector employees have
the right to engage in “concerted activities for the purpose of collective
bargaining or other mutual aid or protection.” For this reason, restricting
private-sector employees from discussing their compensation with one another is
illegal. There is a limit as to who can discuss pay with other employees.
Supervisors, for example, would not be considered an “employee” and therefore
they can be prohibited from discussing pay. In addition, employees who have
access to a company’s payroll could also be prohibited from sharing other
employee’s private salary information.Why is the Wagner Act in Place?
It was the purpose of the Wagner Act to protect employees
against unfair pay practices. Giving the employees the freedom to discuss their
compensation does a lot to help avoid unfair pay practices and puts pressure on
a company to ensure pay-for-value (pay based on experience, education, skills,
and the assigned responsibilities of the job) is in place. If an organization
has a pay-for-value system in place, then they would not be afraid of employees
discussing their compensation with each other. It is when a company has
something to hide within their pay practices that problems arise when pay is
discussed.
Employers Who Violate This Law
Employers who violate this law could have repercussions that
would range anywhere from a wrongfully terminated lawsuit to the possible loss
of federal contracts.
If an employee has been wrongfully fired for discussing
their pay, they are may contact the National Labor Relations Board (NLRB) and
file a complaint. The NLRB may begin an investigation into the matter regarding
their former employer.
In most cases, pay secrecy is against the law. Employer should have a pay-for-value system in place and avoid any possible penalties for violating the Wagner Act.
