Prohibiting Employee Discussions of Pay May Violate Federal Law

Prohibiting Employee Discussions of Pay May Violate Federal Law

Does your company prohibit employees from discussing pay? Many do, but what many employers don’t realize is that the National Labor Relations Act (“NLRA”), the federal law that governs unionizing and union-related activities in the workplace, can limit an employer’s right to restrict employees from engaging in certain conversations or activities. Although the NLRA applies most commonly to unionized employees, the law can also apply to employees who are not represented by a union and who are not involved in any unionizing activities. This broad scope of the NLRA continues to surprise many non-union employers and to result in avoidable liability.

The NLRA protects an employee’s right to engage in “concerted activities” for self-organization or for “mutual aid or protection,” regardless of whether the employees are currently represented by a union. The law also prohibits employers from interfering with an employee’s exercise of these rights. In recent years, the National Labor Relations Board (“NLRB”), the agency that enforces the NLRA, has continued to apply these general principles to prohibit employers from terminating employees who complained about their pay and from adopting policies that prohibit open discussion of employee compensation.

In 2002, for example, Citizens Financial Group acquired Mellon Bank and created a new business, “Citizens Investment Services Corp.” Citizens then hired some of the financial consultants who had worked for Mellon, including Christopher Hayward. Hayward and the other financial consultants at Citizens were highly paid white-collar employees who were not involved in any union.

As part of the new business, Citizens restructured the compensation plan of Hayward and the other financial consultants. Hayward and others criticized the proposed and final compensation plans. For example, Hayward sent an e-mail to the Director of Investment Sales, describing the “general consensus” among his fellow employees. He raised compensation issues during monthly meetings, and, at a quarterly business meeting, he invited the HR Group Manager to meet with a group of financial consultants to discuss their complaints about the compensation plan. Shortly thereafter, Hayward sent another e-mail to the Regional Sales Manager in which Hayward jokingly referred to himself as the “union president.”

Two weeks later, Citizens fired Hayward purportedly for denigrating the skills and qualifications of newly-hired financial consultants, criticizing the integrity and management structure of the company, and poaching a sale from outside his geographic territory.

Hayward filed an unfair labor practice charge with the NLRB alleging that Citizens unlawfully terminated his employment. An administrative law judge ruled that Citizens unlawfully terminated Hayward for engaging in “protected concerted activity” in violation of the NLRA. At the next level, the NLRB adopted the administrative law judge’s findings, and, subsequently, the DC Circuit Court of Appeals affirmed the decision in December of 2005, nearly three and a half years after Hayward’s termination.

Finding for Hayward, the Court of Appeals ruled that “concerted activity includes circumstances where individual employees work to initiate, induce or prepare for group action.” The Court also found that “an individual who brings a group complaint to the attention of management is engaged in concerted activity even though he was not designated or authorized to be a spokesman by the group.”

Applying these principles to Hayward’s situation, the Court found that he “engaged in two types of concerted activity: individual acts taken in order to bring the complaints of the group of experienced financial consultants to the company’s management … and group activities designed to advance the interests of these consultants.” The Court found that Hayward’s references to the “general consensus” of the consultants and his reference to himself as “union president” in e-mails to management indicated that he was, in fact, representing the collective view.

Hawyard’s case was not all that unusual. Other 2005 decisions of the NLRB highlight the use of the NLRA by non-union employees. For example, the agency found that employers violated the NLRA by maintaining and enforcing rules prohibiting:

• The disclosure of “compensation data” by and among employees;
• “negative conversations” among employees and managers; and
• release of “any information” about employees;
• complaints by employees to customers about terms and conditions of employment.

These cases exemplify the largely underappreciated extent to which the NLRA regulates the conduct of non-union employers. Regardless of whether your company is unionized, the NLRA prohibits certain conduct involving concerted activity. Employers should always consider the effects of the NLRA on their handbooks and other written and unwritten policies, as well as on the manner in which they carry out discipline. This is particularly true when addressing an employee who purports to be representing the concerns of other workers. While written policies and documented discipline can be critical in defending against every employment claim, employers must be certain that these documents also evidence compliance with the NLRA, not a violation of the law.

This article is intended to identify issues and provide general information and should not be considered legal advice. Employment issues are highly complex and case specific. Solutions will vary depending on the facts of the particular situation. To obtain advice about your particular issue, please contact our office at 503-399-1070.