Achieving Results, Exceeding Expectations

Employment Law

Salary Secrecy and the Law

top secretMany corporations and even small businesses admonish their employees not to discuss their salaries. Some employers even threaten sanctions, including firing, for those who discuss their salaries with other employees. What rights do employees have in terms of discussing their salary and what rights do employers have in terms of controlling the speech of their workers?

Before we discuss the possible legal ramifications, we should understand what motivates both employers and employees regarding salary secrecy.

Employers believe that maintaining salary secrecy has the following benefits:

  • It allows companies to reward better performing employees in a private way.
  • It allows for a range of salaries, based upon experience, work behavior and other intangibles.
  • Salary secrecy enables the business to entice new employees to sign on with the company, even if their pay rate is higher than their already hired colleagues.
  • Discussions of salaries can lead to disgruntled workers, which could hamper productivity, decrease office morale and even impact employee retention.

Employees believe that being able to talk about salaries brings them the following benefits:

  • Employees can be sure they are getting paid what they are worth.
  • Employees can enter into negotiations with a sense of what the salary ranges are and what other benefits they can try to obtain.
  • Employees can ensure that they are not being unfairly treated, vis a vis their colleagues.

On April 8, 2014, President Obama signed an executive order, forbidding federal contractors from retaliating against employees who discuss their salaries with one another.

Some believe that the Obama executive order was superfluous. Already on the books is legislation that bolstered employees’ rights regarding salary discussion: the National Labor Relations Act (NLRA), which was enacted in 1935. This guaranteed all employees, those who worked for the public and those who were private sector workers, the right to discuss pay and benefits, as well as working conditions. Although many believe that the NLRA only applies to unionized workers, that is, in fact, not the case.

Salary disclosure is de rigeur among the entire workforce of Whole Foods, according to the book The Decoded Company: Know Your Talent Better Than Your Know Your Customers. CEO John Mackey publishes all of the workers’ salaries from his salary to the newest hire’s and anybody in the company can view the data. In addition, data regarding store income and profitability is shared company-wide. Mackey believes that the lack of salary secrecy contributes to a spirit of engagement, combined with accountability.

While Whole Food’ modus operandi may still be that of an outlier, they appear to be following the letter of the law, which does forbid employers from retaliating when their employees discuss salary, benefits and working conditions.

Employment issues can be complicated. Please consult with an attorney who specializes in employment law, if you have questions or concerns.