Pay Secrecy Policy Equals Gagging the Voices of Employees Equals Potential Legal Exposure

Employer policies, such as pay secrecy or pay confidentiality rules have long been the subject of ongoing debate and litigation.  In particular, the National Labor Relations Board (NLRB) has long held that pay secrecy policies violate the National Labor Relations Act (NLRA)[1] because they interfere with an employee’s (union and non-union) right to engage in “concerted activity” for the purpose of collective bargaining or other mutual aid or protection.

In general, pay secrecy policies prohibit employees from discussing their wages with fellow co-workers.  It has been noted this prohibition is far more widespread in the private than in the public sector.  Some argue that such policies not only perpetuate wage discrimination against women and minorities, they have a chilling effect on employee speech and restrict the amount of pertinent wage information available to employees.

In response to these arguments, some government entities have implemented measures to promote wage disclosure or inquiries by employees, while at the same time protecting these same employees from unlawful retaliation.  For instance, in April 2014, President Obama issued an executive order prohibiting federal contractors from discharging or otherwise discriminating against an employee or applicant for employment for inquiries about, discussion or disclosing his or her compensation to another employee or applicant.  Similarly, in 2015, the U.S. Securities and Exchange Commission (SEC) adopted a final rule that requires public companies to disclose the pay ratio between the compensation of their chief executive officer and the median compensation of their employees.  The new rule requires these companies to disclose this pay ratio in either their registration statement, proxy and information statements, annual reports or other public filings that call for disclosure of executive compensation.  The new rule takes effect for the first fiscal year beginning on or after January 1, 2017.  Lastly, several states, including New Jersey have enacted pay secrecy laws.  In 2013, the New Jersey Law Against Discrimination[2] was amended to prohibit employer reprisal for an employee’s request for wage and benefit information for the purpose of investigating potential wage discrimination or taking legal action.

Notwithstanding these efforts to make wages more transparent, including the proposed Paycheck Fairness Act, proponents of wage disclosure continue to face stark opposition.  In a recent Third Circuit case[3], the Court remanded the issue of whether an employee’s discharge for his discussion of salary and benefit information, which was allegedly accessed through unauthorized means, violates the NLRA.  Thus, on remand, the NLRB must balance the employer’s proffered justification for the discharge (unauthorized dissemination of confidential salary information) against the employee’s right to engage in “concerted activity” under the NLRA.  Although it is unclear how the NLRB will decide this issue, it seems, from a historical perspective, that the protection afforded employees to discuss their compensation without fear of adverse action will not be completely lost.

In sum, pay secrecy policies remain prevalent in the workplace.  However, there appears to be a public thrust toward open wage dialogue among employees, which arguably would allow companies to identify and correct discriminatory wage practices and thus ensure greater equal employment opportunities for all.

By Sally A. Sattan, Esq. and Ty Hyderally, Esq.

[1] 29 U.S.C. §151, et seq.

[2] N.J.S.A. 10:5-12(11)(r).

[3] MCPC INC., v. NLRB, 2016 U.S. App. LEXIS 2457 (3d Cir. 2016).

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