Your Boss’s Big Little Secret

You have a right to know how much your coworkers are paid -- and if you want to close the wage gap, you should.

Sonny Abesamis / Flickr

Iceland recently decided its laws preventing pay discrimination were insufficient. New legislation will require employers to prove that their employees are being compensated fairly. This is a significant advance. Pay secrecy gives employers the power to discriminate against workers, or to pay them based on arbitrary, opaque criteria. Forcing employers to be transparent about compensation puts Iceland at the front of the pack in protecting worker rights. In many countries, including the United States, the onus is on the employee to uncover pay discrimination, and bring about legal action to remedy the situation.

Asking about pay is a delicate subject. We have a strong norm against discussing pay, maintaining the pretense that the motivation to work comes from somewhere other than the need for a paycheck, such as dedication to the enterprise. Pay secrecy is just one tool employers use to keep employees from talking openly about their experiences at work, and acting collectively to improve their situation.

The issue of pay secrecy is particularly fraught for women, who have historically been paid substantially less than men for doing the same work. This is starting to change. In an era of “lean-in” feminism, women have become familiar with research showing that Women Don’t Ask and that starting a career with a lower salary than a man in a similar position can lead to dramatic differences in compensation over the long run.  These days, more and more women are asking.

But asking doesn’t mean receiving. Nothing demonstrates the oppressive norms surrounding pay secrecy better than the recent case of Taylor Byrnes. Byrnes, like seemingly any normal job applicant, inquired about wages and benefits while interviewing for a job at a Winnipeg company called SkipTheDishes. Her inquiry was met with derision, and SkipTheDishes canceled her second interview. Apparently Byrnes was too “focus[ed] on compensation;” the company was seeking workers with “intrinsic motivation” and presumably no rent or other bills to pay.

Byrnes’s case seems ridiculous, but unfortunately it’s anything but rare. The organizational culture of many startups demands this kind of fierce dedication and willingness to overlook often abusive employment practices — from the sexual harassment recently revealed at Uber, to pay discrepancies and discrimination.  Startup culture has evolved to emphasize dedication to a mission, or purpose, rather than the simple act of selling one’s labor. Employees are encouraged to persevere, motivated only by devotion to disruptive technologies and the promise of an eventual payoff through equity or options. And while the techno-libertarians dominating startup culture may believe that “information wants to be free,” this interest in liberty doesn’t usually extend to workers organizing for better work or fairer pay.

Tech startups are drawing from an old playbook; SkipTheDishes’s shenanigans replicate time-worn practices of discrimination. Lily Ledbetter, whose name is on the most important piece of US legislation prohibiting pay discrimination in decades, was discriminated against for years. She worked as a supervisor at a Goodyear Tire factory in Alabama, and shortly before her planned retirement in 1998, Ledbetter received an anonymous note, informing her that she was being paid significantly less than her male counterparts. Ledbetter filed an EEOC complaint, and in retaliation the company reassigned her to a position requiring heavy manual labor.

Ledbetter sued, and initially won a multi-million-dollar jury award against the company, but Goodyear appealed the case to the Supreme Court. The court ruled that the statute of limitations had expired because the violation occurred on the day Ledbetter received her first discriminatory paycheck (twenty years earlier).  Under existing law, Ledbetter would have had to file the claim within 180 days of receiving this paycheck. But because pay is usually a secret, Ledbetter would have no way of knowing she was being discriminated against, rendering the already meager EEOC protection useless.

The 2009 Lily Ledbetter Fair Pay Act — President Obama’s first substantive piece of legislation — was designed to remedy this “rock and a hard place” state of affairs. Ledbetter herself wasn’t compensated for the decades she spent being paid less than her male coworkers, but the Ledbetter Act protects future workers by specifying that discrimination occurs every time the worker receives a paycheck, in effect resetting the clock on the statute of limitations.

Obama signed another executive order in 2014 requiring federal contractors to go even further, banning them from retaliating against both employees and job applicants “who inquire about, discuss, or disclose their own compensation or the compensation of other employees or applicants.” In protecting job applicants, this executive order goes beyond the safeguards covering all employees under the National Labor Relations Act.  (The Trump administration is set on rolling back numerous Obama-era protections for employees of federal contractors, so this policy may not endure.)

In theory, the Ledbetter Act works in concert with Section 7 of the National Labor Relations Act which grants non-supervisory employees in private-sector companies the freedom to discuss their wages or salaries. Any such discussion is concerted activity, protected under the act. However, the penalties for employer violations remain woefully weak, and may disappear entirely under the current presidential administration.

Moreover, as legal scholar Cynthia Estlund argues, most workplaces have strong norms against discussing salaries, and many workers incorrectly believe that they may be punished for these discussions. For example, numerous NLRB rulings prohibit companies from putting rules in employee handbooks that flout federal protections of workers’ rights. Yet companies still do it. In 2010, an administrative law judge ruled that ten different sections of the T-Mobile employee handbooks violated federal labor law, including provisions that effectively stopped workers from discussing wages and working conditions. In this case, the company was imposing an illegal policy on over forty thousand workers, chilling their ability to organize together at the same time that the Communications Workers of America was attempting to organize a union at T-Mobile.

Some 60 percent of private-sector workers report that their employers have similar policies to T-mobile. These policies, while technically unenforceable, create a climate where workers do not discuss pay, and therefore cannot uncover any disparities. Many workers wrongly think (no doubt encouraged by their employers) that it’s against the rules to discuss their wages or salaries with their coworkers.

States have tried to weaken these practices. Ten states currently have “pay secrecy” legislation on the books that prohibits retaliation against workers who discuss their pay; the legislation applies to all employees, whether or not they are covered by the National Labor Relations Act.  Yet despite these protections, US employers frequently ban their workers from discussing pay. A 2014 survey found that about half of employers either prohibit or discourage workers from discussing compensation, even though this prohibition usually violates the NLRA.

Granted, some salaries in the United States are already subject to disclosure requirements: executives in publicly traded companies, public employees, and the highest-paid staff in nonprofits, as well as union staff, all have salaries that are filed with government agencies. In many cases third parties (from state newspapers and good government groups to the shadowy anti-union Center for Union Facts), make these salaries searchable and easily available online. For most American workers, however, the salaries of their fellow workers remain a mystery.

But it’s a mystery that can be solved, and the best way to do so is through collective bargaining.  Most collective bargaining agreements include transparent pay scales where an employee can locate his or her salary based on job title, credentials, skills, seniority, experience, or some combination thereof. Pay under most collective bargaining agreements is open and transparent. Unions can eliminate wage disparities within a single employer and dramatically limit wage inequality even across employers. Collective bargaining agreements remove the ability for managers to set pay based on their own criteria which may be arbitrary, or influenced by implicit or explicit bias.

Even in the absence of a union, open discussion of wages reduces inequality. Recent research shows that state laws prohibiting pay secrecy reduce the gender pay gap, particularly for women with higher levels of education. Although there is sparse analysis of the effects of these laws thus far, the most significant, by economist Marlene Kim, finds that “pay-secrecy laws appear to help women determine if they are underpaid compared to men and may be useful to reduce the gender wage gap, especially among those with a college (or higher) education.”

Of course, pay transparency doesn’t solve all workplace problems.  Knowing your coworkers’ salaries, without any mechanism for voice in the workplace, may create as many problems as it solves. It’s also insufficient in and of itself. Some companies, like Whole Foods and the tech startup Buffer, offer pay transparency, but these are also nonunion companies that practice at-will employment; workers have no organized collective voice, so acting on information about pay may be risky. Consider, for example the case of a gay employee who learns that he is being underpaid for his position compared to straight coworkers. Since most states allow discrimination against gay workers, the worker risks being legally fired if he demands equal pay.

Nonetheless, fighting pay secrecy is worthwhile. Without open disclosure of pay, employers retain the ability to discriminate and isolate employees, and maintain the pretense that workers are motivated by a higher calling. We still work in a world where admitting that your paycheck matters violates a taboo, as Taylor Byrnes learned. So in the absence of widespread collective bargaining, shifting the burden of proving pay equity from ill-informed workers to employers who have the benefit of perfect information would be an excellent first step towards workplace equality.