When it comes to workplace conversations about wages, most employers believe silence is golden. Employees swapping details about their paychecks is not only frowned upon, company policy often prohibits it. But that’s beginning to change.

Colorado recently became the fourth state to prevent employers from keeping a lid on workers’ pay conversations. Nationwide legislation could be next.

“There are no business groups that are in favor of this law,” says Josh Kirkpatrick, shareholder in Littler Mendelson’s Denver office. “If they had their druthers, most employers would not want employees discussing their wages. It tends to breed unrest.”

The Wage Transparency Act, which took effect in August, amends the Colorado Anti-Discrimination Act and prohibits employers from taking adverse actions against employees who discuss their wages with others. The act makes it illegal to “discharge, discipline, discriminate against, coerce, intimidate, threaten or interfere with any employee” for discussing wages. The law also forbids employers from requiring workers to sign nondisclosure or confidentiality agreements limiting an employee’s right to discuss openly the pay he receives.

“There’s going to be more of an onus on employers,” says Burke Huber, a shareholder at Ogletree Deakins. “It will require an open policy allowing people to know what co-workers are making. Employers will have to pay more attention to [their pay practices] so they don’t create a hostile environment.”

When workers learn about each other’s wages, they may jump to the wrong conclusion, Kirkpatrick adds. “They say, ‘Oh, this is discrimination’ or ‘I’m not valued here.’ When fact of the matter is there are many factors that go into establishing an individual’s pay rate.”

Seeking Equity
Colorado joins California, Michigan and Illinois in protecting employees’ right to discuss their wages. Colorado State Sen. Sue Windels (D), who co-sponsored the Wage Transparency Act, says the legislation is an attempt to bring equity to pay rates across the board–for men, women, minorities and immigrants.

“Every year I carry a resolution to the legislature on pay-equity issues,” Windels says. “It’s difficult to tackle a comprehensive bill, so I take on one component of the big picture. This year it was employers prohibiting employees from sharing information regarding what they’re paid.”

Similar federal legislation is now wending its way through Congress. In July the House passed the Paycheck Fairness Act, which aims to close the wage gap between men and women while also prohibiting employers from retaliating against employees who share salary information.

Many employment attorneys believe such legislation is bad for business. Employers try to limit discussion about wages because there are so many things besides gender or race that factor into what people are paid, according to Liza McKelvey, a partner at Jackson Lewis.

“If I find out that my male colleague is making $20,000 more than I am, it will hit me on a visceral level, and I won’t think about the fact that he’s got a lot more experience or there’s a difference in our educational background,” she says. “Most employers are not trying to hide things. They’re trying not to create a disgruntled employee.”

But that can happen when a worker is not fully aware of the nuances of the employer’s salary structure. “A company may have to pay more to attract someone from another company or to retain that employee,” Kirkpatrick says. “It may be that someone has more job skills than another person in that same position. Not everyone knows the entire story that’s driving a fellow worker’s pay rate.”

Policy Adjustments
As the lid on salary talk continues to be lifted, employers will be left with little choice but to adjust policies to reflect legislation that grants workers what Huber points out are freedom of speech rights already guaranteed by the
First Amendment.

“The first thing an employer should do is look at employee handbooks to see if there’s any prohibition against discussion about wages and remove it,” McKelvey says. “Then they should look at what the market demands are for an employee in a certain position. If you have people who feel like they’re being paid a fair wage, they’re much less likely to complain about it with their co-workers and more likely to focus on their job instead of their pay.”

Conducting a market analysis can also help an employer justify pay variances based on nongender-and nonrace-related factors such as experience, educational background or training, which Kirkpatrick says is one way to put a positive spin on the Wage Transparency Act and similar legislation.

“There’s a heightened need for employers to make sure their pay practices are fair and that they can justify why some employees are paid more than their peers,” he says. “Given the fact that employees are now entitled to talk about these things, pay practices are more likely to be challenged in the future.”