The Wave of Pay Transparency Laws: Why We Should Discuss Our Salaries
Loyola University Chicago School of Law, JD 2023
Your employer may discourage you from discussing your compensation with your co-workers, but did you know it’s not actually illegal? For example, some managers may portray to you that if you ask about your coworker’s pay, you might as well start packing up your belongings. In addition, most of us are uncomfortable with broadcasting our salary, but what if this secrecy is the reason for the conflict? If we removed that secrecy, it would allow for salary transparency to be standard in the workplace, eliminating the economic marginalization of workers and closing the wage gap.
What is “pay secrecy”?
Many sectors in the United States implement company policies that keep employees from discussing how much money they make. The policy is known as “pay secrecy”. These policies are sometimes written down in employee handbooks. Still, managers sometimes imply those policies by urging employees not to talk about their salaries amongst their coworkers. Even though legislation prohibits companies from punishing workers who disclose their pay, many people still work in environments where they don’t or can’t talk about money.
What makes pay secrecy illegal?
Under the National Labor Relations Act, private-sector employees have the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” This language may seem confusing, but the statute essentially provides that coworkers talk about things that matter to them at work, including compensation. The National Labor Relations Board has even been stating that these secrecy policies that employers implement have violated the National Labor Relations Act. Even if an employee signs a nondisclosure agreement with an employer, they will still be protected when talking about their salary. In conclusion, no language in the National Labor Relations Act declares that workers’ pay is confidential information.
Impacts of pay secrecy
The biggest issue of pay secrecy is information asymmetry. This arises when one party in a negotiation has substantially more information than the other. The information asymmetry gives the employer the advantage, especially in initial hiring or annual raise discussions. This advantage that the employers have can be used in a way that will save them substantial money. This form of asymmetry could lead to salary discrimination, which would increase the wage gap we currently have in the United States. It seems that the wage gap could be reduced significantly if current and prospective employees acquired knowledge about how their company determines salaries for individuals and how that is implemented across their workforce.
The proliferation of pay transparency laws
Many states have enacted laws that reflect the social norm of increasing pay transparency requirements on employers, including California, Colorado, Connecticut, Maryland, Rhode Island, and Washington. These laws establish wage range disclosure obligations and where, when, how, and to whom each state must implement these disclosures. Recently, one of the most significant employment states, New York, has even implemented a policy to make it mandatory for companies to disclose salaries on job advertisements. The bill passed by New York legislators states that employers who fail to list minimum and maximum salary ranges for New York City-based roles are engaging in discriminatory practices.
Transparency laws regarding workers’ salaries have been implemented to diminish the unfair, one-sided way of doing business when prospective employees seek a new job. Of course, like all new laws, there will be positive and negative consequences. The positives of sharing salaries may help many businesses and organizations in the long run by allowing their employees to understand where they stand in the company and how to move up in pay range. In addition, this form of disclosure could encourage and motivate employees to improve their performance and improve their standing in the company. However, the downfall of these salary disclosures may result in conflict among the employees and the employer, even to the point where some employees might altogether leave the company when they find out that they have been underpaid compared to their coworkers. This everlasting battle of transparency among employees’ salaries will ultimately continue in the future. Still, the disclosures that are being implemented will allow the employee to negotiate with confidence that the information they have is based on the salary that the company implements for the position, not on some other, discriminatory factor.