Employers’ Rights and Responsibilities on Wage Secrecy

As an employer, you have a vested interest in maintaining harmony among your employees and protecting your interests. One issue that often comes up is the discussion of wages among current and past employees. Such discussions can lead to employee discontent, so what can you as an employer do to address this issue?

Employers will often seek to enforce agreements with their employees, barring employees from disclosing their wages and benefits to each other. However, this impulse to conceal your wage agreements may lead to trouble, as it is often frowned upon, if not outright made illegal by Federal and State regulators. That is why it is important for employers to know their rights and responsibilities on wage secrecy. 

What does the law say?

The National Labor Relations Act (NLRA) forbids employers from interfering with employees' rights to participate in certain "concerted activities." Concerted activities are a catch-all term used by the Federal Government to refer to several collective actions taken by employees protected by law, including the ability of employees to communicate wages with one another. Substantial case law exists to show that confidentiality agreements written to restrict an employee's ability to communicate their wages with just about anyone violate the NLRA and are illegal under federal law. While the NLRA is most associated with unionized workplaces, its rules and regulations apply to most private sector employers, including manufacturers, retailers, private universities, health care facilities, and the construction industry.[1]

The State of Colorado has expanded upon federal law and offers additional protections for employees through the Colorado Wage Transparency Act, part of a larger anti-discrimination package of legislation. For example, Colorado Revised Statute § 24-34-302 makes it unlawful for employers to "Discharge, discipline, discriminate against, coerce, intimidate, threaten, or interfere with an employee or other person because the employee or other person inquired about, disclosed, compared, or otherwise discussed the employee's wage rate." In addition, that same law bars employers from requiring employees to sign waivers prohibiting their ability to disclose their wage information.[2]

So, what does that mean for Colorado employers?

The Wage Transparency Act means two things for Colorado employers: (1) you may not interfere with employees' ability to discuss salaries amongst each other or with others; and (2) Confidentiality agreements treating employee wages as secrets are unenforceable.

Often the first option in an employer's toolbox is to set up a confidentiality agreement protecting certain information from disclosure. Unfortunately, while these agreements can be used to protect a company’s trade secrets and intellectual property, as well as potentially protecting you from disparaging remarks from disgruntled ex-employees, these agreements cannot supersede state or federal law. Therefore, any confidentiality agreement provision prohibiting employees from disclosing their wages is unenforceable.  

How about employers in Texas and beyond?

 Most states, including Texas, Wyoming, and Arkansas, have not adopted legislation like the Colorado law listed above. However, this does not mean that employers may participate in all the activities banned in Colorado, but rather that employers in these states are subject to federal law alone as it pertains to these issues. This lack of specific state statutes on point can create legal grey areas and confusion for employees and employers alike. 

What happens if I break the law?

Under the Colorado Pay Transparency Act.[3]  and the NLRA[4], employers who have violated the terms of either law may be required to re-instate previously terminated employees. In some instances, violating employers may be required to provide back pay or punitive damages, or pay a penalty of not less than one hundred dollars for each day the violation continues. Both the Colorado Pay Transparency Act and the NLRA contain the same language, and therefore employers face the same penalties for violations under either Act.

If you have any questions or concerns about the Colorado Wage Transparency Act, please contact an attorney with Galvanize Law for additional information and guidance.

The guidelines written in this article apply specifically to employer and employee relationships. For questions relating to whether you have employees or independent contractors on staff, please see our article on Independent Contractors v. Employees.

Sources

[1] The NLRA does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act (interstate railroads and airlines). Most employees in the private sector are covered under the NLRA., however the law does not cover government employees, agricultural laborers, independent contractors, and supervisors (with limited exceptions).

[2] Oregon, California, Virginia, and several other states have adopted similar laws.

[3] See C.R.S. §§ 8-1-140(2) and/or 8-5-203(4) (“(1) If an employer, employee, or any other person violates any provision of this article 1, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined for which no penalty has been specifically provided, such employer, employee, or any other person commits a petty offense; (2) If any employer, employee, or any other person fails, refuses, or neglects to perform any duty lawfully enjoined within the time prescribed by the director or fails, neglects, or refuses to obey any lawful order made by the director or any judgment or decree made by any court as provided in this article, for each such violation, such employer, employee, or any other person shall pay a penalty of not less than one hundred dollars for each day such violation, failure, neglect, or refusal continues; (3) In the case of a corporation, the violation of any of the provisions of this article, including any violation fixed as a misdemeanor or other crime, is considered a violation of the provisions of this article by all officers, agents, and representatives of said corporation aiding, abetting, advising, encouraging, participating, inciting, or acquiescing in such violation, and they are individually guilty of such violation and subject to the fines, penalties, and punishments provided in this article”).

[4] See 29 U.S.C.A. § 162 (NLRA) ((1) If an employer, employee, or any other person violates any provision of this article 1, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined for which no penalty has been specifically provided, such employer, employee, or any other person commits a petty offense; (2) If any employer, employee, or any other person fails, refuses, or neglects to perform any duty lawfully enjoined within the time prescribed by the director or fails, neglects, or refuses to obey any lawful order made by the director or any judgment or decree made by any court as provided in this article, for each such violation, such employer, employee, or any other person shall pay a penalty of not less than one hundred dollars for each day such violation, failure, neglect, or refusal continues; (3) In the case of a corporation, the violation of any of the provisions of this article, including any violation fixed as a misdemeanor or other crime, is considered a violation of the provisions of this article by all officers, agents, and representatives of said corporation aiding, abetting, advising, encouraging, participating, inciting, or acquiescing in such violation, and they are individually guilty of such violation and subject to the fines, penalties, and punishments provided in this article.”