“Bob, don’t talk about your wages at work, please.”
“Fred, don’t ask about the wages of other employees, please.”
“John and Susan, don’t compare your salaries, please.”
Any of these statements by an employer could get the employer into deep legal trouble. Telling employees not to discuss their wages can subject employers to lawsuits in several states. The growing trend in wage secrecy laws, which typically include provisions forbidding employers from taking adverse employment actions against employees for discussing their wages, does not look like it will slow down anytime soon.
The Rising Tide
The rise in these laws began in the 1980s, when California and Michigan became the first states to enact wage secrecy laws. Ten states—Colorado, Connecticut, Illinois, Louisiana, Maine, Minnesota, Oregon, New Jersey, Vermont, and New Hampshire—passed wage secrecy laws prohibiting employers from making adverse personnel decisions against employees, between 2000 and 2015.
Wage secrecy laws promote national and state legislation that require employers to equally compensate all employees for equal work, regardless of the employee’s gender. According to the United States Department of Labor, in 2014, women who worked full time earned 79 cents to every dollar that a male earned. One of the policy rationales behind wage secrecy laws is that if employees can freely discuss their wages and know what other employees are paid, employees can identify disparities in wages.
In April 2016, Louisiana passed the Equal Pay for Women Act, a measure to eliminate pay inequality between men and women. The Louisiana law does not allow employers to make an adverse employment decision against an employee for “inquiring about, disclosing, comparing, or otherwise discussing the employee’s wages or the wages of any other employee.” Following suit, in August 2016, Massachusetts passed one of the country’s most robust equal pay laws, as the Massachusetts law bans employers from inquiring about job applicants’ salary history, as well as prohibits employers from taking adverse actions against employees for discussing their wages.
Like the Louisiana equal pay law, the Maryland Equal Pay for Equal Work Act, which went into effect on October 1, 2016, includes wage secrecy provisions that forbid an employer from taking adverse actions against employees for “inquiring about, discussing, or disclosing the wages of the employee or another employee; or requesting that the employer provide a reason for why the employee’s wages are a condition of employment.” The law also bans Maryland employers from making adverse personnel decisions against employees for inquiring about another employee’s wages, among other provisions. Several other states including, Ohio, Washington State, Virginia, South Carolina, Indiana, and Pennsylvania are currently considering similar wage secrecy legislation.
Violations Can Be Costly
Violating a wage secrecy law can be costly for an employer. States impose various civil penalties for violations of its wage secrecy laws. California employers may be required to reinstate an employee who has been terminated or suspended for discussing their wages as well as pay the employee for lost wages, including interest. Colorado allows an employee who has prevailed in a lawsuit under its wage secrecy law to recover punitive and compensatory damages, if the employee can prove that the employer’s unlawful conduct was intentional. Violating Vermont’s wage secrecy law can require an employer to pay a prevailing employee compensatory damages, punitive damages, court costs, and attorney’s fees.
Although most states’ wage secrecy laws subject an employer to only civil liability, a Michigan employer can face criminal liability for violating the state’s law. It remains to be seen whether more states will expand their wage secrecy laws to include criminal liability provisions.
Wage Secrecy Laws May Have Limited Exceptions
Several states do allow employers to limit discussion about wages in limited circumstances. For example, some states such as New York and the District of Columbia do not allow persons with access to employees’ wage information as part of their job function, such as Human Resources personnel, to disclose those wages. The exceptions to wage secrecy laws are limited, however. As such, employer should tread with caution when limiting discussion about wages.
Federal Trends in Wage Secrecy Laws
On the federal level, the National Labor Relations Act prohibits employers from taking adverse employment actions against employees for discussing the employee’s wages. Several states’ wage secrecy laws track the language of the NLRA. Further setting a national trend promoting wage transparency, in 2015, the Office of Federal Contractor Compliance Programs issued a Final Rule implementing President Obama’s Executive Order that forbade federal contractors from prohibiting their employees from discussing wages. The Obama Administration introduced the Paycheck Fairness Act, which would ban an employer from taking an adverse action against an employee for discussing the employee’s wages. However, Congress did not pass the legislation.
Congress’ failure to approve the Paycheck Fairness Act does not mean that the federal government will not be holding employers accountable for equally paying all employees. In 2018, the EEOC will require covered employers to submit an updated EEO-1 form, disclosing the pay data of all employees. The EEO-1 form currently requires covered employers to submit demographic information about employees, such as employees’ sex, race, and ethnicity. The EEOC now requires disclosure of pay data in order to assist the EEOC in detecting discriminatory pay practices.
Wage Transparency is Here to Stay
There is no indication that the tide of wage secrecy laws is slowing down or even shrinking. The District of Columbia currently has a wage secrecy law banning employers from penalizing employees for discussing wages. Similar to the new Massachusetts law, the District of Columbia is considering legislation that would prohibit employers from asking applicants about their wage histories.
The increase in wage secrecy laws means that employers who do not want to be hit with a lawsuit should carefully review their employment policies to ensure that they do not unlawfully limit their employees from sharing wage information. Confidentiality and social media policies that have not been reviewed in a while should be dusted off and examined as soon as possible, as these are typical places that could get employers into hot water if they include provisions unlawfully limiting employee speech. Finally, employers should stay abreast of applicable local, state, and federal laws regarding wage transparency. These laws are likely here to stay.