Wage Disclosure Laws Let Workers Compare Pay

A number of variables can drive differences in pay levels within a given organization, including years of service, prior experience and salary histories, to name a few.

If pay disparities exist among staff members in similar jobs, employers might get a little nervous when their employees start comparing their compensation. Some simple sharing of salary information can cause trouble to bubble by resulting in resentment or other tricky issues.

Given the potential for personnel problems to percolate, employers might be tempted to tell people their pay information is private and prohibit all salary prattle. But that could land them in a boiling caldron of hot water!

In fact, "wage disclosure laws" are becoming increasingly common across various jurisdictions, and there’s also a 2014 executive order that prohibits federal contractors from discharging or otherwise discriminating against employees or applicants because they inquire about, discuss or disclose their own compensation or the compensation of another employee or applicant.

Implementing regulations for the executive order, which became effective earlier this year, define compensation broadly to include shift differentials, bonuses, commissions, vacation or holiday pay, allowances, insurance or other benefits, stock options or awards, profit-sharing and retirement benefits. 

The regulations also protect discussions about "compensation information," which includes the amount and type of compensation provided to employees or offered to applicants; the desire to attract and retain certain employees for their perceived value; the availability of employees with similar skills in the marketplace; the worth of similar jobs in the marketplace; job analyses, descriptions or evaluations; salary or pay structures; salary surveys; labor union agreements; and decisions, statements or policies on setting or altering compensation.

Aside from these broad provisions that apply to the employees of federal contractors, separate protections under federal labor law give workers the right to discuss compensation as a form of "concerted activity" aimed at improving wages and working conditions. And this isn’t something that nonunion employers can ignore, since the National Labor Relations Act protects workers even if they aren’t unionized or engaged in an organizing campaign.

Beyond these federal restrictions, employers need to pay attention to state and local laws. For example, wage disclosure laws have been enacted by at least 14 states, including California, Illinois, Massachusetts and New York, among others.

So if employees can’t be stopped from sharing salary information, what can employers do to prevent discord when such discussions occur?

  1. Create a clear system for setting employee salaries and raises. The best way to prevent a discussion about salary from bubbling into resentment is to have clear answers when employees ask questions. For example, when an employee wants to know why a co-worker makes more money, saying, "Because she came in with 10 years of experience you didn’t have" would be a much better answer than "Umm…"
  2. Communicate the basics of how you calculate salary and raises to employees. You don’t need to give detailed information, just a general idea of how salaries are set and when raises are awarded. Providing the information can also motivate employees to work towards raises, assuming compensation systems and policies are carried out with consistency.
  3. Examine employee salaries at least once a year. Is there a gender gap in employee pay? Disparities in pay happen even when you try to avoid them—and not intending to have a pay gap doesn’t save you from liability for having one. It’s better for you to discover issues before they lead to lawsuits.

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