Last fall, I became a barista in a small, “socially responsible” coffee company. A few months later, I got a temporary paralegal position at one of the world’s biggest multinational, corporate law firms.
The two companies had little in common, but both told me one thing: Don't talk to your coworkers about your pay.
At the law firm, this warning was conveyed to me during my salary negotiation. After I had worked for three months through a temp agency, the firm offered me a spot on their payroll. Given the size and success of the firm, the starting salary seemed low.
The HR manager tried to convince me that the offer was competitive. She told me that she couldn’t offer more because it would be unfair to other paralegals. She said that if we did not agree to a salary that day, then she would have to suspend me because I would be working past the allowed temp phase. I insisted that she look into a higher offer and she agreed that we could meet again later. Before I left, she had something to add.
“Make sure you don’t talk about your salary with anyone,” she said sweetly, as if she was giving advice to her own son. “It causes conflict and people can be let go for doing it.” (This is to the best of my recollection, not verbatim.)
It wasn’t all that surprising to hear this from a corporate HR manager. What was surprising was the déjà vu.
Just three months earlier, some of my coworkers at the coffee shop told me that our bosses, who worked in the office on salaries, and even the owner, got a higher cut of the tips than we did. One barista told me that when she complained about it, the managers reduced her hours.
When you make minimum wage and have to fight for more than 30 hours per week, tips are pretty important, so I sat down with my managers to discuss the controversy. That’s when they told me not to talk about it with the other baristas. The owner “hates it when people talk about money,” my manager added, and “would fire people for it if he could.” I sulked back to the espresso machine, making my lattes at half speed and failing to do side work.
In both workplaces, my bosses were breaking the law.
Under the National Labor Relations Act of 1935 (NLRA), all workers have the right to engage “concerted activity for mutual aid or protection” and “organize a union to negotiate with [their] employer concerning [their] wages, hours, and other terms and conditions of employment.” In six states, including my home state of Illinois, the law even more explicitly protects the rights of workers to discuss their pay.
This is true whether the employers make their threats verbally or on paper and whether the consequences are firing or merely some sort of cold shoulder from management. My managers at the coffee shop seemed to understand that they weren't allowed to fire me solely for talking about pay, but they may not have known that it is also illegal to discourage employees from discussing their pay with each other. As NYU law professor Cynthia Estlund explained to NPR, the law "means that you and your co-workers get to talk together about things that matter to you at work." Even "a nudge from the boss saying 'we don't do that around here' ... is also unlawful under the National Labor Relations Act," Estlund added.
And yet, gag rules thrive in workplaces across the country. In a report updated this year, the Institute for Women’s Policy Research found that about half of American employees in all sectors are either explicitly prohibited or strongly discouraged from discussing pay with their coworkers. In the private sector, the number is higher, at 61 percent.
This is why President Obama recently signed two executive actions addressing workplace transparency and accountability. One prohibits federal contractors from retaliating against employees who discuss their pay with one another. The other requires contractors to provide compensation data on their employees, including race and sex. But while these actions protect workers at federally contracted employers, they do not affect others.
The bill that would cover the rest of workers is the Paycheck Fairness Act. The law would both strengthen penalties to employers who retaliate against workers for discussing pay and require employers to provide a justification for wage differentials.
These reforms are necessary to address this widespread, illegal problem that the law has failed to address for decades. Gag rules violate a fundamental labor right and allow for discriminatory pay schemes.
Given their illegality, why are gag rules so common? One answer is that the NLRA is toothless and employers know it. When employees file complaints, the National Labor Relations Board’s “remedies” are slaps on the wrist: reinstatement for wrongful termination, back-pay, and/or “informational remedies” such as “the posting of a notice by the employer promising to not violate the law.”
At the same time, ignorance of the law can just as easily fuel gag rules. Craig Becker, general counsel for the AFL-CIO, used to serve on the National Labor Relations Board. He told me that workers who called the NLRB rarely were aware that their employer’s pay secrecy policy was unlawful.
“The problem isn’t so much that the remedies are inadequate,” Becker said, “but that so few workers know their rights.” He says that even among those workers who are aware of the NLRA, many think that it protects unions but no one else. Now overseeing organizers at the AFL-CIO, Becker has found that before organizers even begin helping workers, they have to educate employees on this very basic law. “Workers call us up saying they’re unhappy and they want to organize,” Becker explains, “and when organizers look at the employee manual, sure enough, they find a policy saying that workers aren’t allowed to discuss their pay.”
Gag rules, then, are policies that flourish when employers know the law and their employees do not.
But why do employers do this in the first place? Many employers say that if workers talk to each other about pay, then tension is sure to follow. It’s understandable: If you found out that your coworker made more than you for doing the same work, then you’d probably be upset.
A study by economists David Card, Enrico Moretti, and Emmanuel Saez from Berkeley and Alexandre Mas from Princeton supports that prediction. To study the relationship between pay transparency, turnover, and workplace satisfaction, they selected a group of employees in the University of California system and showed them a website that lists the salaries of all UC employees. They found that employees who were paid above the median were unaffected by using the website, while those who were paid lower than the median became less satisfied with their work and more likely to start job hunting. This result suggests, according to the authors, that employers have an incentive to keep pay under wraps.
The limitation of this research is that it doesn’t tell us much about whether those employees’ dissatisfaction was a bad thing. While it’s possible that those employees were getting a fair wage and just felt belittled by their comparative pay, it’s also possible that they were getting stiffed.
And many workers are, in fact, getting stiffed—especially women and people of color. Recall the story of Lilly Ledbetter, the inspiration of the Lilly Ledbetter Act, which gives workers a longer period of time to file pay discrimination suits against their employer. Ledbetter was told that she would be fired if she talked about pay with her coworkers, but after nearly three decades of work with Goodyear, someone slipped her a note saying that she was underpaid.
Ledbetter’s case shows how pay secrecy can cause the pay gap between men and women, a gap that widens between men and women of color. More than 50 years after the Equal Pay Act, study after study show that women are still paid less than men for the same work. Some have argued that the pay gap is effectively a myth, attributing it to women’s career choices rather than workplace discrimination. If only that were true. As the National Women’s Law Center has repeatedly pointed out, this “ignores the fact that ‘women’s’ jobs often pay less precisely because women do them, because women’s work is devalued, and that women are paid less even when they work in the same occupations as men.” Even when you look at industries dominated by one sex or the other, the pay gap exists in both.
Ariane Hegewisch is the study director at the Institute for Women’s Policy Research and the author of several reports on pay secrecy and wage discrimination. One of the reasons she sees behind the pay gap is that, five decades after the Civil Rights Act outlawed discrimination on the basis of sex, old-fashioned workplace beliefs still justify sexist pay distribution. For example, in one case, in which a group of women sued Walmart for sexist discrimination in pay and promotions, women testified that their managers said men “are working as the heads of their households, while women are just working for the sake of working,” even though women are now the sole or primary breadwinners in around 40 percent of American households.
Others have explained the pay gap by showing that women are less likely to ask for raises. True as this is, the solution isn’t as simple as telling women to speak up. Several experiments by Hannah Bowles of Harvard and Linda Babcock and Lei Lai of Carnegie Mellon University have shown that employers are more likely to penalize women than men for negotiating. This suggests that women bite their tongues to avoid being called “pushy” or “bossy,” words with particularly negative connotations for women.
We don’t know whether gag rules directly cause wage discrimination, but they undoubtedly open the door to it. Employers who keep pay secret are free to set pay scales on arbitrary bases or fail to give well-deserved raises because of social norms. "When you don't have transparency and accountability,” Hegewisch told me, “employers react to these pressures and biases and women tend to lose out."
Of course, one of the time-tested mechanisms of preventing wage discrimination, unionization, has been in steady decline for decades. Jake Rosenfeld, associate professor of sociology at the University of Washington, has studied unions and is now researching the relationship between pay secrecy and wage discrimination. He told me that although there is not enough data to draw a direct causal line between pay secrecy and unfair wages, we do know that in the public sector, where wage transparency is far more common, pay tends to be more equal and benefits are more evenly distributed.
But in both the public and the private sector, union decline has shifted the balance of power toward employers in a way that can allow employers to keep wages secret and pay their workers unfairly. “Removing a key source of collective power in the vast majority of workplaces opens up space for employers to institute new wage setting practices, and pay secrecy is one of them,” Rosenfeld says. “It’s much harder to keep the books closed when you have a union arguing left and right to open them up.”
Republican lawmakers have blocked the Paycheck Fairness Act three times, claiming that it would just increase lawsuits against employers. They’ve also argued that forcing firms to share their compensation practices would hurt business. But according to Hegewisch, there’s no evidence that lawsuits have increased in states where pay transparency laws have been strengthened, and firms already share compensation information through human resources services like WorldatWork.
If the law did change, we would still face one of the biggest barriers to pay transparency: workplace culture. Even the most confident among us can melt into awkward, self-conscious messes when we have to negotiate our salaries, and asking a coworker about pay seems akin to asking about their sex life. Private companies are showing that opening up the books completely can work, while the public sector has done that for decades, yet many still fear that talking about pay would destroy our workplace collegiality.
On the day my bosses at the coffee shop told me not to talk tips, my morale hit bottom. An organization I once trusted was telling me not to ask basic questions about my compensation. Even if pay secrecy comes with good intentions, this is its unintended effect: It tells workers that their bosses have something to hide, or that they don’t have the right to get a second opinion on whether they are being treated fairly. As Craig Becker told me, “Workers can only improve their situation when they can understand their working conditions.” Deciding whether a pay scale is fair cannot be left up to the employer alone.
The world is bigger. So are the stock options.