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Don't Ask, Don't Tell: Pay Confidentiality in the Workplace
Sacha Cohen

At one time, discussing your salary with colleagues was taboo at most companies. In fact, some organizations even developed policies explicitly banning employees from discussing their pay. At the very least, management strongly discouraged pay talk among workers. However, the trend is shifting away from outright prohibition. An online survey conducted in March 2001 at HRnext.com found that while a majority (51%) of respondents reported their company had no policy about pay confidentiality, 36% of respondents said their companies prohibit such discussions, and 14% said their companies have policies that say discussing pay with a co-worker is permissible.

What many employees-or their employers-may not know is that salary discussions among employees are protected under the National Labor Relations Act (NLRA, also known as the Wagner Act of 1935). Specifically, employers cannot "interfere with, restrain, or coerce employees in exercising their rights under NLRA which protects the employees' right to discuss their 'wages, hours, and other terms and conditions of employment' for their 'mutual aid or protection'."

According to attorney Ann Kiernan, the National Labor Relations Board has ruled for the past 25 years that employer rules forbidding workers to discuss wages are unfair labor practices, in violation of NLRA. Some employers may set pay confidentiality policies in the belief that NLRA applies only to unionized workforces. The relevant portion of NLRA applies even to non-unionized companies, says Kiernan. "Companies that have committed this unfair labor practice have been ordered to reinstate affected workers, with back pay and attorneys' fees, as well as to rescind their rules against wage discussions and to post a notice to all employees telling them about the unfair labor practice charge and its resolution," she says. For example, the Wall St. Journal reported that a small bank in Cincinnati dropped its policy against employees discussing salary when the bank's human resource manager found out that under NLRA the prohibition might lead to legal problems and promptly removed the ban from the bank's employee handbook.

How Secret Is Secret?

Whether it's in the employee manual or just a de rigueur part of corporate culture, many companies frown on employees talking about salaries and raises. The problem with this hush-hush atmosphere is that it's difficult - if not impossible - for employees to know if any discriminatory discrepancies exist.

Critics charge that confidentiality policies may promote discriminatory salary discrepancies in the workplace, making it difficult for employees to prove that they aren't being compensated fairly. The New York Times cited the case of Tracy Jones, a Milwaukee temporary employee who overheard her male colleagues discussing their pay, which turned out to be $1.12 an hour more than she was making. After Jones complained to her agency, a staff supervisor warned employees that if they discussed their pay, they would be fired. Eventually, Jones took her grievance to the Equal Employment Opportunity Commission (EEOC) and was fired. EEOC eventually ruled that the temporary agency and its parent company did engage in gender discrimination when it paid Jones and other women less than men doing the same job.

A Washington, DC-based Internet librarian (who asked to remain anonymous) had a similar experience at her former job. "I worked in a place where a lot of people knew others' salaries. This was due to a major amount of indiscretion on the part of upper management and resulted in a huge morale problem. I was humiliated when I found out that others at my title level and experience were making vastly higher amounts of money, and have to admit it affected my confidence level at that job." She says she wished that there had been policies about discussing salaries. "If the management had kept that information to themselves, and discouraged discussions…they would have prevented a lot of problems." That was a rare instance where an employee preferred a "don't ask, don't tell" policy, but that's hardly the norm.

While the debate rages on, there are some steps that employees can take to make sure they are being fairly compensated without turning to others in the workplace for answers. This is a good reminder to always try to negotiate a competitive salary when you're hired. JobSpectrum also has a list of science-related salary resources. Stop by one of the large online salary sites such as Salary.com and SalaryExpert.com for general salary information and advice.

Above Reproach

From management's viewpoint, salary discussions can lead to morale problems. Many managers agree that allowing employees to openly discuss their salaries does more harm than good. As one manager succinctly puts it, "There are two things that can happen when [employees] discuss review scores or salary: either they feel bad, or the other person feels bad. Is it worth it?"

Stephanie Wilson, a partner in Reed Smith LLP's Labor and Employment Law Group says that employers have to be aware that salary discussions will go on between employees and that trying to put restrictions on those discussions isn't a good choice. For one, she says, it's very difficult to implement policies and even more complicated to investigate instances of supposed wrongdoing. The better approach, advises Wilson, is to make sure that when you hire someone or if you are increasing someone's salary, do your homework and make sure you are offering a competitive salary. "Look at education, experience, what other people at the same level and with similar responsibilities are making, so that if you are ever approached with this, you have good answers formulated ahead of time. That way, you are above reproach should someone come to you and complain about salary unfairness based on raced or gender."

Managers may find themselves in a sticky situation, so to avoid this they should work with the HR staff about salary determination. "Don't make these decisions in a vacuum," says Wilson. Work with your HR department, which should be able to help you determine fair salary offers and wage increases. "[This process] may take longer, but it's beneficial to spend the time up front rather than going back should someone file a complaint. You don't want to be having these discussions when a lawsuit hits, you want to be able to have these discussions early on."

More Than Just Performance

Salaries always reflect more than just performance. They also reflect whatever economic or business pressures are present in the marketplace at a particular point in time. For example in a tight labor market, a company has to strike a balance between external market value and internal equity; this is why a new employee recruited from the outside with particularly valuable skills may earn more than employees who have a longer tenure in the same department. But when inequities in the pay system are exposed, morale is affected, personal privacy issues are raised, and once that information gets outside the company, desirable employees are susceptible to poaching by competitors. As a recent article in the Harvard Business Review noted, "The problem isn't the disparities that aren't justified; it's the ones that are."

The presence of online salary surveys makes it difficult to try to maintain salary secrecy. A company's best strategy is to educate employees about its compensation system, including salary ranges for all jobs. If employees know why they earn what they do and what they have to do to make more, knowing what others make is less important and puts employees in charge of their own futures.

Sacha Cohen is a Washington-based business and technology writer. Her work has appeared in The Washington Post, Kiplinger.com, Fast Company, Oxygen's ka-Ching and other print and online publications. Cohen has been covering Internet trends and culture since 1996.