As a result of an upcoming merger, we are going to have a lot of situations in which there is a disparity in salaries. We have a plan for addressing that over a period of three years, but in the meantime, I would like to institute a policy that prohibits employees from discussing their salaries amongst themselves. I know if the wage disparities become public, there is going to be an uproar–in some cases, workers with similar duties are far apart in compensation. Can I do this? — Sally, HR Director in San Francisco
400+ pages of state-specific, easy-read reference materials at your fingertips—fully updated! Check out the Guide to Employment Law for California Employers and get up to speed on everything you need to know.
Our CELA editors explain the issues involved here.
Salary disparity is a common problem. It results not only from mergers but from salary compression (having to pay entry workers the same as or more than current employees) and from various recruiting challenges and reward programs. Although it would be nice if you could keep your compensation program confidential, unfortunately you can’t.
First, people talk no matter what you mandate. Second, California law prohibits salary “gag orders.” The California Labor Code (Section 232) states that employers cannot require employees to refrain from discussing the amount of their wages, or discharge or otherwise discriminate against an employee who discloses how much he or she is making.
So what can you do? To some extent, this depends on the nature of your workforce. If salaries are decided mostly on an individual basis, you can explain substantial differences in compensation based on duties and performance ratings and time in grade. However, if you have a fairly lockstep salary system with large numbers of employees at essentially the same rate, you might face a bigger challenge if the rates for the same position are substantially different.
One possibility is to bite the bullet and establish new ranges now–instead of phasing them in over three years—and move everyone up the minimum of the new ranges. Then you can let your compensation system take over. Another approach is to publicize the problem. For example, as part of your briefings to employees on the effects of the merger, you might point out that there will be disparities in compensation and that you intend to deal with them to achieve reasonable parity over a period of three years. You can also meet individually with employees to discuss their individual situations.
Depending on the circumstances of the merger, this may not be as big an issue as you might fear. If, for example, the merger resulted in a number of layoffs, you may find that your remaining employees are delighted simply to retain their jobs.