Ask the Expert: How to Implement Fair, Transparent Compensation Practices

Question: Are there any laws regulating whether managers and supervisors are allowed to know the compensation of the employees they supervise?

Answer: There’s currently no law that regulates whether managers and supervisors are allowed to know the compensation of the employees they supervise. Employers may therefore implement policies restricting the sharing of this information. However, you cannot restrict employees in nonsupervisory positions from discussing their compensation with their coworkers.

Section 7 of the National Labor Relations Act (NLRA) ensures employees, even in non-union settings, can “engage in other concerted activities” such as the right to discuss wages amongst themselves. Most employees in the private sector are covered under the NLRA. However, the law doesn’t cover government employees, agricultural laborers, independent contractors, or supervisors.

Under the NLRA, the term “supervisor” means any individual having the authority to hire, fire, transfer, suspend, or to effectively recommend such action along with the use of independent judgment. Therefore, supervisors generally cannot assert claims for violations of “concerted activity” rights.

Employers may not want their employees sharing their compensation with their supervisors or their coworkers. However, it would be difficult if not impossible to prevent such information from leaking. In addition, employers may stifle employee morale or create an unwanted narrative of disparate treatment. As a best practice, you should implement clear and consistent compensation guidelines. Being fair and transparent with compensation may incentivize employees to progress with an employer and likewise promote employee retention.

Jacob M. Monty is a partner with Monty & Ramirez, LLP, in Houston. You can reach him at jmonty@montyramirezlaw.com. 

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