A reader shared with me that her employer’s policy prohibits discussion of compensation with other co-workers and doing so can result in discipline or termination.
The employer told employees that it implemented the policy because it was illegal to discuss compensation with co-workers.
Her employer has it wrong.
In fact, employers who prohibit discussion of compensation among non-management co-workers most likely violate the National Labor Relations Act.
Discussing compensation at work presents an interesting dilemma in today’s workplace because sharing one’s compensation, which seems like something that should be confidential personnel information, could lead to divisiveness at work.
The alternative view, though, is that pay transparency can expose disparate pay practices, which traditionally has negatively affected women and minorities.
Employers should avoid establishing a policy that prohibits discussion of compensation, especially among non-management personnel.
The National Labor Relations Act states that non-management employees have a right to engage in “concerted activity for mutual aid or protection” and “organize a union to negotiate with [their] employer concerning [their] wages, hours and other terms and conditions of employment.” The law has been interpreted to include discussion of wages.
The law applies to private sector employers, including those who are not unionized.
Setting compensation is more difficult than many realize.
Legitimate and non-discriminatory compensation can be based on prior skills, experience, education and performance, among others. The multiple factors involved in the compensation assessment can lead to misunderstanding when one co-worker learns that another earns more.
Employers can avoid some of the controversy that surrounds wage transparency by developing a compensation policy explaining to employees how compensation is set and the factors used.
Pay disparity typically occurs when employers rely upon prior salary at another employer to set compensation. Concerns around this process are so serious that several states have passed laws prohibiting prospective employers from asking candidates about current compensation.
Relying upon prior salary in setting compensation has been further complicated by the roller-coaster ride of a case where the 9th U.S. Circuit Court of Appeals said relying upon salary was not discriminatory, and then said it was discriminatory, and then in February the U.S. Supreme Court vacated the opinion.
Instead of fearing transparency in compensation, employers should develop sound policies in establishing pay and be able to justify any discrepancies.
This requires intentional and ongoing pay analysis, along with carefully analyzed reasons for differences in pay within the same job function.
Employees performing equal work with the same skill at the same level should be paid the same unless there are other factors such as education.
Part of this analysis should include assessments to determine if real or hidden biases are infiltrating compensation practices.
If employers can explain legitimate non-discriminatory reasons for pay disparities, then companies should not fear compensation transparency.
While employees can expose their personnel information, private-sector employers generally cannot. When an employee is made aware of a colleague earning more, the employer cannot generally explain the confidential performance information of the colleague. This can create more divisiveness.
For these reasons, employers need to build trust that decisions are legitimate and not based on improper factors.