Prohibiting Pay Discussion May Trigger NLRA Issues Q&A
Discussing compensation is considered a “concerted activity” and is protected under the NLRA, so rules limiting employees from talking about their pay may violate that law. Find out what the NLRA protects and how you can address this sensitive issue.
“4 Tips for Communicating Your Compensation Plan to Your Employees.”
Q: Can an employer implement a “no pay discussion” rule in its policy handbook? We do not want employees comparing their pay rates since many factors that employees do not know about go into these decisions.
A: A total ban on wage discussions among nonsupervisory employees (i.e., a prohibition that goes beyond limiting the time and place of discussions) is prohibited under the National Labor Relations Act (NLRA). The NLRA is the federal law that gives employees the right to organize into unions and to engage in concerted activities for collective bargaining or other mutual aid or protection. It applies to all organizations regardless of size and protects both union and nonunion employees.
Since higher wages are a frequent objective of employee organizing activity, a rule prohibiting wage discussions has been interpreted by courts and the National Labor Relations Board (NLRB) (the federal agency charged with implementing the NLRA) to be unlawful interference with the right of employees to engage in organizational and concerted activity.
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So, for example, in Cintas Corp. v. NLRB, 482 F.3d 463 (D.C. Cir. 2007), the court upheld the NLRB’s decision ordering an employer to rescind its policy prohibiting disclosure of “any information concerning the company, its business plans, its partners, new business efforts, customers, accounting and financial matters.” The court agreed with the NLRB’s determination that employees could reasonably construe the rule’s unqualified prohibition of the release of “any information” regarding “its partners” to unlawfully restrict their discussion of wages and other terms and conditions of employment with fellow employees.
And, in Citizens Inv. Servs. Corp. v. NLRB, 430 F.3d 1195 (D.C. Cir. 2005), the court enforced the NLRB’s ruling that the employer violated the NLRA when it fired an employee because of his protected concerted activity of protesting compensation terms and payments for financial consultants.
In addition, the policy does not even have to be in writing to violate the NLRA; it only has to be orally communicated to employees. For example, in NLRB v. Main St. Terrace Care Center, 218 F.3d 531 (6th Cir. 2000), the court upheld the NLRB’s ruling that the employer violated the NLRA because its managers verbally instructed employees not to discuss wages.
Note that the NLRA’s definition of who is an employee protected by the Act does not include supervisors. A supervisor is defined as “any individual having authority, in the interest of the employer, to hire, transfer, suspend, layoff, recall, promote, discharge, assign, reward, or discipline other employees, or responsibility to direct them, or to adjust their grievances, or effectively to recommend such action.” In addition, the supervisor must use independent judgment in the exercise of such authority and cannot act in merely a routine or clerical nature.
Although supervisory employees are not covered by the NLRA, most HR experts agree that you should not implement or enforce a policy prohibiting the discussion of wages among workers, regardless of supervisory status. There are two reasons for this advice: (1) the lack of trust and secretive atmosphere created runs counter to good employee relations, even if only applied to supervisors; and (2) the policy may be misapplied to nonsupervisory employees in violation of the NLRA.
(Download a free Pay Procedures model policy including HR best practices and legal background.)
As an alternative to a prohibition, consider adding a policy statement to your handbook that encourages employees to direct questions or concerns about compensation to the human resources department or their department head. Although this policy will not prevent employees from talking about their pay, at a minimum, it may encourage them to bring their concerns to you instead of their coworkers.
Regards,
Robin Thomas, J.D.
Personnel Policy Service, Inc.
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