Is an employee’s salary “confidential information” that a company can require to be kept secret?

Is an employee’s salary “confidential information” that a company can require to be kept secret?

Generally no, with some notable exceptions.  Under the National Labor Relations Act, employees’ discussion of wages with one another is considered a “concerted activity” that cannot be prohibited under the Act.   Additionally, the U.S. Department of Labor recently issued regulations implementing Executive Order 13665, which requires “pay transparency” by federal government contractors.  This order generally prohibits contractors from disciplining or firing an employee for asking about wages or sharing wage rate or salary information with others.

Nevertheless, a private-sector employer may restrict managerial employees from discussing wage and salary information with each other.  The National Labor Relations Act does not protect managerial employees, and thus their discussion of wages and salaries is not a “concerted activity” protected by that Act.  Similarly, the executive order does not apply to private-sector employers (as opposed to federal contractors).

Even in these situations, there may be reasons for employers not to have or enforce a secrecy rule.  First, a court may not agree that wages or salaries are properly deemed “Confidential” under a Non-Disclosure Agreement or other restrictive covenant signed by an employee, or may rule that such an agreement is unenforceable.  Second, in some instances, enforcing such a rule may violate other laws concerning wages and pay equality.  For example, an employee fired for describing his or her pay to other employees may claim that the employer retaliated against the employee for opposing pay discrepancies between men and women or people of different races.

When an employer has valid reasons for preventing managers from discussing their pay with others, it should seek advice from a knowledgeable labor and employment lawyer to discuss how and when to apply and enforce the policy.

The above is provided for informational purposes only and should not be construed as legal advice.

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