Picture this: A manager calls his subordinates into a conference room and asks them to write down their salary and pin it to a board for everyone to see. The thought of that may make some of you cringe worse than many of the moments on reality TV. In fact, this idea was the premise of the 2012 British reality television show Show Me Your Money. Recently, National Public Radio checked in on how the company that was involved in the show was doing two years after implementing that policy.

In the meantime, other companies have adopted salary transparency policies as well, although not as a publicity stunt. Some employers believe that increased transparency improves worker morale. Additionally, President Barack Obama recently signed an Executive Order prohibiting federal contractors from retaliating against employees who discuss their salary. If the Paycheck Fairness Act (PFA) ever passes, it will extend that protection to all employees. All of this raises a question: Should employees’ salary information be public knowledge?

The argument for pay transparency

Publicizing your employees’ salary information may seem like asking for trouble. However, that is already the status quo for public workplaces. Recently, some private employers have begun following the government’s lead. The primary argument in favor of publicizing salary information is that increased transparency will boost employee morale. Employees will feel valued if they know they aren’t being shortchanged, and transparency can lead to honest, productive discussions between employees and their bosses about the value they bring to the company.

By contrast, if information about an employee’s salary “gets out” (imagine a pay stub accidentally left in the break room), other employees may think the employer has been cheating them if their coworker receives a higher salary. Additionally, publicizing pay information shows that you have nothing to hide. If you pay female or minority employees less than other workers, it would be readily apparent.

Reality (TV) check

Before you call everyone into the conference room to implement a pay transparency policy, realize that there are several drawbacks. First, publicizing salary information significantly reduces the information asymmetry and leverage employers currently enjoy when negotiating salaries. No employee will conclude that she is being paid too much, but many workers will assert that they are being paid too little. Also, pay disparities among employees with similar job responsibilities could lead to jealousy, which can make a work environment toxic. Thus, even if pay transparency has merit for companies that are starting from scratch, the transition to salary transparency would likely be costly and disruptive for existing companies.

Can you prevent employees from sharing pay information?

Be careful about preventing employees from discussing their salaries with each other. The PFA would make it illegal for employers to discriminate against employees who discuss their salary with coworkers. While the bill was blocked again on Monday, President Obama has signed an Executive Order that puts the same restrictions on federal contractors. However, even without passage of the PFA, so-called gag orders on employee salary discussions may be illegal. The National Labor Relations Act (NLRA) prohibits employers from discouraging employees from engaging in concerted activity, including discussing pay with each other.

Takeaways

There are pros and cons to salary transparency. As a baseline, make sure your pay practices do not violate the NLRA. Beyond that, the decision to adopt a pay transparency policy may depend on your industry and company atmosphere. Pay transparency policies may work best at start-up companies, where everyone is starting out on the same page. However, there is a reason pay transparency was the premise of a reality TV show: There’s a good chance that sharing employees’ salary information will lead to drama.

Connor Beatty is an employment law attorney with Brann & Isaacson in Lewiston, Maine. He may be contacted at cbeatty@brannlaw.com

About: Maine Employment Law Letter:

Excerpted from Maine Employment Law Letter and written by attorneys at the law firm of Brann & Isaacson. MAINE EMPLOYMENT LAW LETTER should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. Anyone needing specific legal advice should consult an attorney. Contact the attorneys at Brann & Isaacson.