Employee compensation is a sensitive subject, one that many employers would like to keep secret.
Can an employer in the U.S. create a company policy that prohibits employees from discussing pay rate and salary levels with other employees or (gasp) on social media?
For the most part: no, employers may not prohibit employees from discussing compensation according to the National Labor Relations Board (NLRB) and an April 2014 Executive Order from President Obama.
Obama Executive Order Protects Employees of Federal Contractors to Discuss Wage and Compensation
Companies not covered by the NLRA who are Federal contractors now must adhere to a similar standard according to the Executive Order.
“The contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant.”
NLRA Allows Employees to Engage in Pay Discussion
Companies covered by the National Labor Relations Act (NLRA) cannot limit employees’ concerted activities for the purpose of “collective bargaining or other mutual aid or protection” according to Section 7 of the NLRA. Although the phrase concerted activities may seem broad or unclear, the NLRB has made very clear interpretations over the years, resoundingly on the side of employees’ rights to discuss salary and wages. See examples of NLRB decisions below.
Colorado Wage Transparency Act
In Colorado’s 2008 Wage Transparency Act (S.B. 122), Colorado employers are prohibited from retaliating against employees for sharing wage information and from requiring employees to sign document purporting to deny the right to discuss pay information.
Exceptions to the Rule: Who Can’t Discuss Pay?
- An employee whose job function involves access to company wage and payroll information may not disclose employee pay information to other employees unless directed to by the employer or an investigating agency.
- Employers not covered by the NLRA or the Federal contractor executive order include municipal governments and religious schools. Workers in those institutions are subject to the policies of their respective employers and may be unable to discuss pay levels.
NLRB Cases Protecting Employees’ Rights to Discuss Wages and Compensation
The NLRB hears cases of potential violation of the NLRA to decide if employers are violating workers’ rights to perform concerted activities for the betterment of working conditions or worker representation. Over the years, they’ve ruled (and decisively) on the right of employees to discuss pay levels and compensation packages. Here are some examples from the past three decades of NLRB decisions.
- 1980 – Texas Instruments v. International Union of Electrical, Radio and Machine Workers, AFL-CIO, employees involved in organizational leafleting distributed company wage survey information, in violation of company policy. The NLRB found against the employer and ruled that prohibiting employees from discussing its own wage schedules with nonemployees, substantially interfered with the employees’ organizational efforts.
- 1989 – Brookshire Grocery v. Mark Moise. Mark Moise noticed several sheets containing wage increase information in a supervisor’s office. Moise did not commit trespass to access the payroll information, which was kept in a location that he routinely entered as part of the normal course of his duties. He copied the wage information concerning each employee and then shared the information with several employees. He was terminated by his employer, but the NLRB ruled that the employer could not prohibit employees from discussing wages. They also found that the interrogation of several employees about the incident violated Section 8. [§ 158.] (a) (1) of the NLRA by interfering with, restraining, or coercing “employees in the exercise of right guaranteed by the NLRA”.
- 1990 – Service Merchandise Company, Inc. v. Priscilla Jones. The employer violated the NLRA by distributing and enforcing a company policy forbidding all wage discussions. To take “affirmative action” (i.e. remedy the situation) the company had to revise its policy and post the following Notice to Employees at each of its locations:
The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice.
Section 7 of the Act gives employees these rights.
- To organize
- To form, join, or assist any union
- To bargain collectively through representatives of their own choice
- To act together for other mutual aid or protection
- To choose not to engage in any of these protected concerted activities.
WE WILL NOT distribute, maintain, or enforce rules prohibiting you from discussing your wages or other terms or conditions of employment with others.
- 2003 – Custom Cut, Inc. v Southwest Regional Council of Carpenters, United Brotherhood of Carpenters & Joiners of America. After being laid off after completion of a construction project, two retail carpenters were not rehired when their positions were advertised for a new project. The employer cited the men’s discussion of wages with other employees as one of the reasons for not rehiring them. The NLRB ruled that the employer had unlawfully retaliated against the employees.
- 2011 – Ambriola, Co. v. Unnamed Charging Party. Supervisors at an Ambriola cheese processing plant announced merit pay increases but told employees that they were prohibited from discussing the extent of their pay increases, or risk being fired. Employees talked anyway, and at least one was fired for discussing the pay increases. The NLRB ruled this to be in clear violation of the NLRA.
The Take Away for Employers
The clear message for employers: Say no to prohibiting workers from discussing pay and compensation. The law errs on the side of protecting employees’ right to concerted activity.