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Can your company enforce a rule about wage secrecy?

On Behalf of | Oct 8, 2021 | Employment Law

A number of considerations influence what you ultimately pay individual workers. Their previous job experience, education and negotiating skills can all influence their wages, as can rapport with their co-workers and managers.

Unfortunately, this might mean that some workers in one department become upset if they learn that their co-workers make more money than they do. Some employers have tried to avoid the possibility of disputes or raise requests from workers by having a wage secrecy rule.

Can you discipline or terminate a worker who has violated your company’s wage secrecy rule by discussing their pay or asking their co-workers what they make? The short answer is no.

Discussing compensation is an act protected by federal and state laws

The federal laws that allow workers to unionize and collectively bargain protects their right to discuss factors like job responsibilities and compensation. For workers in the state of California, there is a second layer of protection in the form of the California Equal Pay Act.

After substantial updates to the law in 2015, the California Equal Pay Act explicitly makes retaliating against workers for discussing their wages illegal. In fact, if your employment contract or policies still contain clauses demanding wage secrecy, it may be time to update your handbook or contract because those secrecy requirements are themselves illegal under California state law.

Additions in the years since 2015 have added race and ethnicity to the law, making it illegal for employers to pay workers different amounts for substantially similar work based on their racial or ethnic background. The law even prohibits asking for previous pay data in most situations.

You can only comply with the law if you understand it

Employment rules in California change so rapidly that it can be difficult to keep up with them. Businesses that don’t understand federal and state law may unintentionally violate employment laws, which could lead to claims brought against the business by individual workers or even a group of former employees.

Learning about your obligations as an employer and reviewing your contracts and employment practices with someone who understands the nuances of both federal and state employment laws could help protect your business against expensive and reputation-damaging worker claims.