Pay Secrecy – Do You Know the Law?

The NLRA & Pay Secrecy Laws
The National Labor Relations Act, also known as the Wagner Act, severely limits employers who want to prevent pay discussions. Many companies would prefer that their employees not discuss their pay with other employees and adhere to a strict pay secrecy code. Managers worry that employees may become jealous or feel they are unfairly compensated when salary data becomes known. However, they argue that two employees with similar job duties and different salaries may still be fairly compensated. These workers may not understand how their own performances, specific job duties, and individual experiences and educations affect their salary calculations.
Despite these arguments against allowing salary 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.

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.

There are also pay confidentiality rules that prevent employees with access to other employees’ compensation data, such as HR employees, from discussing that information with other employees. Those PSC rules are considered legal and are not the subject of this article.

Who Does the NLRA Protect?

Enacted in 1935, the NLRA protects union and non-union employees who want to discuss their compensation with each other as part of a concentrated effort towards collective bargaining or another beneficial policy. Even if an employee signs a nondisclosure agreement, he or she can still legally talk about their compensation. NLRA 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. The NLRB will evaluate the complaint and may open a case against the employer.

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. 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.


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 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. Ten states have pay secrecy policies that extend further rights to workers and limit the ability of businesses to control if workers discuss their compensation.

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.

About the author

Jennifer Orechwa

In over 25 years of helping companies connect with their employees, Jennifer has gained a unique perspective on what it takes to build a UnionProof culture. 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.