'Pay Secrecy' Policies At Work: Often Illegal, And Misunderstood

Apr 13, 2014
Originally published on April 13, 2014 6:03 pm

President Obama says his administration is fighting to close the gender wage gap, the gulf between what working men and women earn for the same job.

Last week, Obama moved to circumvent a divided Congress on the issue. He announced two executive actions promoting the idea of "equal pay for equal work," both directed at creating more transparency in the workplace.

For one, the president directed the Department of Labor to collect more information on what federal contractors pay their employees, "so pay discrimination can be spotted more easily."

Obama also signed an executive order prohibiting federal contractors from retaliating against employees who talk about their salaries or other compensation information.

"Pay secrecy fosters discrimination and we should not tolerate it," the president said, "not in federal contracting or anywhere else."

The intention is that if women find out their male co-workers are earning more, they can do something about it.

But here's the thing: Under a nearly 80-year-old federal labor law, employees already can talk about their salaries at work, and employers are generally prohibited from imposing "pay secrecy" policies, whether or not they do business with the federal government.

So why is the president signing an executive order? It's a matter of visibility for labor law and this particular right, says Cynthia Estlund, a law professor at New York University. The law, she says, "is not really well understood." And many don't even know this right exists.

To better understand this complicated topic, here is a breakdown of the basics:

What Is 'Pay Secrecy'?

Pay secrecy is a workplace policy that prohibits employees from discussing how much money they make. These policies are sometimes written down in employee handbooks. In some cases, those policies are implied, and managers simply urge employees not to talk about their salaries.

What Makes 'Pay Secrecy' Illegal?

Under the National Labor Relations Act, enacted in 1935, private-sector employees have the right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection."

The language is somewhat antiquated, but according to Estlund, "it means that you and your co-workers get to talk together about things that matter to you at work."

Compensation is one of those things you can talk about. The National Labor Relations Board, says Estlund, "has long held that these pay secrecy policies that many employers have in writing violate the National Labor Relations Act."

Even if an employee signs a nondisclosure agreement with an employer, Estlund says, the employee would still be protected when talking about salary.

"You can't just declare information about people's pay to be confidential information that can't be discussed," she says.

What Happens To Employers That Violate The Law?

Employers caught violating the law have to offer certain "remedies," which, according to Estlund, are typically "not very serious."

"It doesn't cost very much to violate the NLRA in most cases," Estlund says, "and so employers aren't so afraid of violating it." But the National Labor Relations Board can order employers to provide back pay to wrongfully terminated employees and to offer former employees their old jobs back.

The president's executive order provides a penalty that goes beyond the labor board's punishments. Companies that do work for the federal government and retaliate against employees for talking about pay could now lose a federal contact, and a lot of money.

"Even a very remote threat that you'll lose your federal contract is a very big worry," Estlund says.

How Common Are These Policies At Workplaces?

There are a couple different estimates of how many companies have policies on pay secrecy — whether on the books or merely implied.

A 2011 survey from the Institute for Women's Policy Research found that about half of workers "report that the discussion of wage and salary information is either discouraged or prohibited and/or could lead to punishment."

A survey of private-sector employers from 2001 found that more than one-third had specific policies that banned workers from talking about their compensation with their co-workers.

Are There Limitations To The Law?


For one, the law has a limited definition of "employee." For example, supervisors do not qualify as employees, nor do people who work as independent contractors or agricultural laborers.

And not all employers are subject to the National Labor Relations Act (NLRA). Here's what the labor board's website says on the issue:

"The NLRA applies to most private sector employers, including manufacturers, retailers, private universities and health care facilities. The NLRA does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act (interstate railroads and airlines)."

There are other exceptions: People who work in Human Resources and have access to a company's payroll could be prohibited from sharing other employees' private salary information.

Estlund also says that the law doesn't protect "mere griping" about pay, which would not rise to the level of "concerted activity" as outlined by the law.

What About Non-Unionized Employees? Are They Protected?


According to the NLRB, "employees who are not represented by a union also have rights under the [National Labor Relations Act]."

What Can I Do If My Employer Fires Me For Talking About Pay?

You can contact a regional office of the National Labor Relations Board and file a complaint. The NLRB may investigate and initiate a case against your employer.

In February 2013, for example, Lyn Teare won a case against her former employer, a civil engineering company, which had fired her two years earlier. The NLRB found that the employer had improperly fired Teare for discussing salary issues, and she received two years' worth of back pay, plus the option of getting her job back. (She did not take the job offer.)

Like so many employees, Teare says she did not know about the law on pay secrecy at the time of her dismissal.

"The funniest part," she says, was that her bosses "didn't even know about the law themselves."

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Working women back here in America make less money than men. It's what's known as the wage gap. The size of that gap is a matter of some debate, but several studies over many decades have confirmed the basic points. This past week, President Obama used the power of his office to try to narrow the gap, at least for one slice of the American workforce. He picked a fight with a practice known as pay secrecy.

PRESIDENT BARACK OBAMA: First, I'm going to sign an executive order to create more pay transparency by prohibiting federal contractors from retaliating against employees who discuss their pay with each other.


VIGELAND: The hope is that if women know that their colleagues are making more for equal work, they can do something about it. This order only applies to federal contractors, but here's the thing. Under federal law, with few exceptions, you already have the right to talk about your salary. We called up Cynthia Estlund. She's a professor at New York University's School of Law, and she says employees have had this right for nearly 80 years.

CYNTHIA ESTLUND: Since 1935, the National Labor Relations Act has provided that private sector employees basically have a right to engage in concerted activity for mutual aid or protection. That's, you know, old-fashioned sounding language, maybe, but among other things it means that you and your co-workers get to talk together about things that matter to you at work.

So the National Labor Relations Board has long held that these pay secrecy policies that many employers have in writing violate the National Labor Relations Act.

VIGELAND: What if I sign a contract that has a nondisclosure agreement attached to it? Then I'm not protected, right?

ESTLUND: That's a really good example of some limitations on this policy. Employers do have some legitimate interests in confidentiality. And so trade secrets, for example, can be protected. People whose job it is to deal with other people's pay information, they can be prohibited from disclosing information. But talking about your own and your co-worker's pay among yourselves, the employer is not allowed to simply declare that to be confidential information and prohibit employees from talking about it.

VIGELAND: So in other words, HR can't go around and tell everybody what you make, but you can.

ESTLUND: Exactly.

VIGELAND: How common is it for employers to flout this law and tell employees that they can't talk about it?

ESTLUND: Well, I've seen some studies that suggest maybe 40 percent of employers actually have policies prohibiting employees from discussing each other's pay.

VIGELAND: Forty percent?

ESTLUND: Something like that. Now, I don't know for sure if that's 40 percent have it on paper because sometimes, employers have what are called pay secrecy norms. So you find if you start talking about it, you might get a nudge from the boss saying, we don't do that around here. That's also unlawful under the National Labor Relations Act.

VIGELAND: What protection do you have, then, while you are trying to fight a policy like this? I mean, if we're giving a hypothetical - say, I'm talking with my fellow employees, and my boss finds out and reprimands me. What do I do?

ESTLUND: Technically, you could go to the National Labor Relations Board, which has many regional offices throughout the country, and you can file a charge online and complain about it. Unfortunately, it doesn't cost very much to violate the NLRA, in most cases, and so employers aren't so afraid of violating it. But in principle, the fact that you can get a remedy down the line is supposed to deter the employer from engaging in this misconduct. And it's supposed to encourage employers to internalize these rules.

VIGELAND: Given that the law is already on the books and it's pretty clear-cut, why do you think the president signed this executive order this week?

ESTLUND: Well, I think, as we've discussed, the National Labor Relations Act is - it's not really well understood. People don't know much about it, and it's under-enforced. The penalties are not very serious. What this executive order does that the labor law doesn't is, it provides a potentially very scary sanction.

VIGELAND: What is that sanction?

ESTLUND: Well, it says that we don't want to deal with contractors who engage in this sort of conduct. Even a very remote threat that you lose your federal contract is a very big, you know, worry compared to the worry that sometime down the line, you might be given a slap on the wrist and told not to do this anymore. And maybe you have to reinstate someone if you fired them.

VIGELAND: Cynthia Estlund is a professor at New York University's School of Law. Professor Estlund, thank you so much for your time.

ESTLUND: Thank you.

VIGELAND: As Professor Estlund said, pay secrecy policies plainly violate federal law. But that hasn't stopped some companies from firing employees for talking about their salaries, people like Lyn Teare. Back in 2011 she was working for a civil engineering company in Houston. Teare says she had a conversation with someone who was interested in working there and they talked about salaries. Shortly thereafter, the bosses asked Teare to swing by.

LYN TEARE: The HR manager was there with her little brown envelope and they said you've discussing salaries. I said, excuse me? And, yeah, and that's not allowed.

VIGELAND: The HR Manager told Teare that salary discussions were not allowed and fired her. And at the time she didn't know the pay secrecy policy was illegal.

TEARE: Did not know that. Unh-unh.

VIGELAND: Neither did the bosses.

TEARE: This is the funniest part. They didn't even know about the law themselves.

VIGELAND: But her husband did know and so Teare called up the NLRB and filed a complaint. After about two years of legal wrangling she won her case along with a big check for back pay plus the option of getting her old job back. She didn't take them up on that last part. Regardless of the law, keeping salary information private is getting harder and harder these days, especially with websites out there like GlassDoor.com.

SCOTT DOBROSKI: So we're kind of like the Yelp for jobs and companies and this is where employees go, share information that once was deemed taboo. And it's all about workplace transparency.

VIGELAND: That's Scott Dobroski. He's a career trends analyst at GlassDoor. It's a website that collects employee reviews of companies and CEOs and invites people to post salary information anonymously for anyone and everyone to see. You guys ever hear from employers who were a little miffed at what you do and the information that you're putting out there?

DOBROSKI: Absolutely. Employers are very curious as to what is going on on GlassDoor, and actually...

VIGELAND: Very curious, that's how you put it?


DOBROSKI: Yeah, that's how I put it. Look, the truth is transparency has come a long way in six years. So when we did launch, we got the questions all the time, what is this? You're exposing my information. How dare you. I want this down. What we've seen now is employers actually understanding that, hey, this is actually where good employees, potential employees are already inherently interested and researching your company.

VIGELAND: In other words, transparency is coming even when it comes to salaries. And if employers can't beat them, they might as well join them.


VIGELAND: This is NPR News. Transcript provided by NPR, Copyright NPR.