Pay Secrecy and the EEOC

Anne King 

A recent decision in an EEOC case against retail chain Sterling Jewelers highlights the issue of pay secrecy in the workplace – in particular the common employer practice of prohibiting employees from discussing wages with one another.  Pay secrecy may stem from a formal employer policy, informal practices or customs, or norms of workplace culture.  The threat of disciplinary action or retaliation is a powerful deterrent, and will keep many employees from talking about their pay with co-workers.  But this makes it all the more difficult for employees to become aware of pay discrimination or wage and hour violations.

The phenomenon of pay secrecy has come up in some of the Supreme Court’s most significant recent employment cases.  Lilly Ledbetter  found out that Goodyear Tire was paying her less than male coworkers only after she received an anonymous note.  And the Wal-Mart  plaintiffs uncovered evidence of a company policy prohibiting employees from talking about their wages.

In EEOC v. Sterling Jewelers, Inc., a magistrate judge recommended enforcement of an administrative subpoena that sought documents relating to Sterling’s policy of prohibiting pay discussions among employees.  (The case is one of several lawsuits against Sterling, all alleging widespread sex discrimination at the company.)  The EEOC based the subpoena on a document it received from a former employee, which stated that Sterling disciplined her for discussing pay with co-workers, in violation of the company’s “code of conduct.”

Sterling Jewelers takes an interesting approach to the problem of pay secrecy. Sterling argued that it shouldn’t have to comply with the subpoena because it doesn’t, in fact, maintain a policy prohibiting employee discussions of pay.  But the court didn’t find this convincing at all – and reasoned that Sterling’s position actually contradicted its protestation that the subpoena imposed a significant burden.  Notably, the court emphasized that the EEOC generally has the authority, in investigating a charge of discrimination, to determine whether an employer maintains a pay secrecy policy. That’s the case, the court said, even when there is no other evidence of such a policy.

This has to be the right answer.  Because in a legal system where employees will find it extremely difficult to bring class actions against their employers, the EEOC’s investigation and enforcement capacity is especially crucial.

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