Myths That CEOs Tell Each Other – Part I: “You Can Order Employees Not To Discuss Their Pay With One Another”
Many U.S. businesses have a policy similar to the one below:
Confidentiality of Employee Benefits Information.
Employees are prohibited from discussing their benefits, including wage levels and other company benefits with other employees. This information is confidential and cannot be discussed in the workplace. Employees found to have violated this policy will be subject to disciplinary action, up to and possibly including termination.
If this looks familiar, you are not alone. Similar policies exist at companies across the country. The leaders of these companies might be shocked to learn that such policies are illegal. Section 7 of the National Labor Relations Act (29 U.S.C. §157) provides all employees the right to “engage in concerted activities,” including
the right to discuss their terms and conditions of employment with each other. This does not only apply in “union shops” or to government contractors. Section 8(a)(1) of the law makes it an unfair labor practice to deny or limit employees’ Section 7 rights.
For decades, the National Labor Relations Board (“NLRB”) has taken the position that employers cannot restrict employees from discussing their pay and benefits. The NLRB and courts agree these policies violate the NLRA.
The National Labor Relations Act.
Thus, under the National Labor Relations Act of 1935 (“NLRA”), workers have the right to engage “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.” While some employers seem to understand that they can’t fire employees simply for talking about pay (which you cannot do), they do not know that it is also illegal to discourage employees from discussing their pay with each other.
In spite of the clarity of the law, companies continue to create rules prohibiting discussions of pay and benefits. A recent report from the Institute for Women’s Policy Research found that about 1⁄2 of U.S. employees are either explicitly prohibited or strongly discouraged from discussing pay with others at their place of employment.
Why Do People Do It If It Is Illegal?
Given their illegality, why are such policies common? Ignorance of the law is a large part of it. Employees simply don’t know that their employer’s policy is illegal. Unfortunately, some employers don’t either, but ignorance of the law in this case is no excuse. When an employee does become aware of their rights – sometimes after a termination action, they file suit under the NLRA, beginning a long and expensive process for their former employer. Among those workers who are aware of the NLRA, many think that it protects employees in “union shops,” but no one else, which is incorrect.
Employers create policies against discussing benefits because they believe that if their employees discuss their pay with one another, then workplace tension will result. But, there is a real question about which is worse – knowing others are getting paid more, or the dissatisfaction (reduction in morale) employees might have when they learn that their employer is giving them orders that clearly violate the law.
Is There Nothing We Can Do?
There are some limits concerning the NLRA and the rules against discussions of benefits among employees. One is the manner in which employees exercise their rights. While workers have the right to have such conversations, employers can require the employees to have them at times other than when they are supposed to be doing their work. In such cases, an employer cannot single out discussions about pay and permit other “non-work” discussions. For example, if you prohibit discussions of pay and benefits during working time, you should prohibit discussions of Girl Scout cookie sales too. Have a consistent rule that “non-work” discussions take place only on breaks and other non-working times. Permitting discussions of other topics unrelated to work, while prohibiting discussions of benefits will be considered evidence of intent to violate employees’ NLRA rights.
Employers can actually limit the content of such discussions where privacy rights under HIPAA, the ADA, or other laws apply. In short, employers can prohibit employees from discussing third party’s confidential information related to medical conditions, for example.
How the workers obtain the pay and other benefits information is also a consideration. Workers can discuss their pay and benefits with others, and co-workers can provide their own information in discussions. But, if workers get the information by gaining access to restricted areas or the like, then not only will they not be protected by the NLRA, they could suffer other consequences.
You should not have a blanket prohibition against discussing salary, wages, and employee’s benefits. Discuss with your legal counsel any concerns you have about the manner and content of discussions and confidentiality of employee benefit information. You may have general discussions with your employees about working during working time, but don’t single out discussions of wages or make threats of termination.
Many forward thinking companies make it easy for their employees to learn about how their benefits stack up with their competition. They have decided that when they are open about pay and benefits, their workers feel they are part of the team, it
increases employee morale, and it promotes teamwork across the organization.
Don’t simply find some form policy on the internet and use it. This is the first in a series of “myths” and these myths are perpetuated by business leaders giving one another bad advice. Some employers draft their own policies, without doing the research necessary to ensure the policy complies with the law. Would you prepare your business plan in such a manner? There are so many counterintuitive things in the area of employment law – if you don’t get good advice you can find yourself in an expensive lawsuit even when you think you are doing everything right.