Confidentiality of Terms: Cannot discuss salary or benefits

Question

I recently witnessed an offer of employment where, under the confidentiality of terms, it stated:

You agree to follow the Company's strict policy that employees must not disclose, either directly or indirectly, any information, including any of the terms of this agreement, regarding salary, bonuses, or stock purchase or option allocations to any person, including other employees of the company; provided, however, that you may discuss such terms with members of your immediate family and any legal, tax, or accounting specialists who provide you with individual legal, tax, or accounting advice.

So if you were to tell your friend, or if coworkers were trying to wise up on their salaries, you'd be breaching the confidentiality of terms. I've never seen this kind of condition before- is this a common request?

Answer 1

While, I would not call the clause common, it is a clause that appears in many consultant contracts. One reason is that often consultants are paid at a higher rate than employees doing the same work. Talking about your consultant rate of pay with employees making significantly less than consultants causes problems for both sides of the consulting agreement. The simplest way to resolve the problem is to restrict the consultant from disclosing their pay.

However as an employee of a company, you have the right to organize as a labor union. The NRLA provides protections that makes this type of clause illegal to enforce if you are either in a Union, or if you are trying to organize a collective bargaining unit with other employees.

Answer 2

I wouldn't say it's completely unusual; by controlling who knows about salary, the management maintains a control on the balance of power. That being said, as long as you're not talking to someone who is concerned about maintaining that balance of power this doesn't seem enforceable. What's to stop you from having a conversation with a friend about your compensation?
Furthermore, this information could prove to really beneficial to you, especially if you find out that you're being paid less than colleagues with similar experience. (something I've been on both sides of)

Answer 3

I won't speak to rather or not it's legal, but it's not that unusual. Essentially there are two separate mindsets when it comes to sharing pay amounts (and benefits).

The first, and probably "oldest", certainly the most common (and the one I prefer) is to never tell your co-workers what you make. The reasoning is that you may be worth more than your co-workers for one reason or another. In fact, you may be getting more money then your supervisor because you're worth more to the company. Remember what the company pays you is between you and the company. You negotiate it, and just as you would not accept "but we pay Bill less", you can't expect them to respond to, "you pay Susan more". The good side of this is that everyone should have the ability to work for what they think they are worth. The downside is that it becomes harder for employees to track whether they are being discriminated against.

The other idea is to share with everyone your pay. That way you can make sure you're getting the same as everyone else. The good side is that you know you are getting fair treatment because everyone earns $11.50 an hour. The downside is that you basically have no negotiating power. If you want $12.00 an hour you're SOL, because it means I would have to give everyone $12.

With regards to not sharing pay outside the company, it gets more fuzzy. Do I want prospective employees to know that I pay $11.50? What does that do to my (the company) ability to negotiate, and more importantly my ability to attract better talent by offering better benefits?

Whether or not an employee can be held to that contract is something that a lawyer would need to answer. But the idea is common, and the reason behind it is not as sinister as some people think.

Answer 4

I'd say this is very common in the US. Employers don't want people to compare notes because it will inevitably lead to someone getting upset and demanding more money.

I'm not saying that's a good reason not to compare notes, only that that's generally the employer's motivation.

According to NPR it hasn't been legal in my lifetime to have this type of policy, but that hasn't kept most of my previous employers from having such policies - firing offense policies IIRC.