chevron-down Created with Sketch Beta.


Pay Transparency Laws Challenge Employers’ Ability to Advance Trade Secret Arguments Regarding Employee Salary

Lauren Frisch


  • Some states have adopted laws that are intended to ensure pay equity among employees regardless of their gender, race, national origin, or other demographic factors.
  • One unintended consequence may be that they weaken trade secret protections previously afforded to certain salary information.
  • Labor and employment and trade secret practitioners can use certain strategies to help ensure their clients’ confidential employee compensation information is protected.
Pay Transparency Laws Challenge Employers’ Ability to Advance Trade Secret Arguments Regarding Employee Salary
Daenin Arnee via Getty Images

When New York City saw its salary transparency law take effect on November 1, 2022—requiring covered employers to include the salary range when posting any job, promotion, or transfer opportunity for a role that can or will be performed in New York City—it joined a whole host of jurisdictions that have or soon will walk down the same path. Indeed, the State of New York is not far behind, with a similar pay transparency law expected to go into effect in 2023. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island, and Washington—as well as cities and counties in New York (Ithaca, New York City, and Westchester County), New Jersey (Jersey City), and Ohio (Cincinnati and Toledo)—also have adopted laws requiring employers to publicize salary ranges. Genevieve Burger-Weiser & Robert Holtzman, “Pay Transparency Laws Are Expanding Across the Nation. What’s an Employer to Do?,” JD Supra, Oct. 24, 2022. These laws are intended to ensure pay equity among employees regardless of their gender, race, national origin, or other demographic factors. However, one unintended consequence may be that they weaken trade secret protections previously afforded to certain salary information.

Pay Transparency Laws Run Counter to Traditional Notions of Confidentiality

Indeed, pay transparency laws stand at odds with the traditional notion that employees should not discuss their salaries with each other and, in some cases, are prohibited from discussing such information. Employers have historically cited the “war for talent” to justify their efforts to keep salary information under wraps. Market shifts following the pandemic, coupled with inflation, have rendered this concept as timely as ever. For 2023, in fact, companies are anticipated to boost salaries as much as 4.6 percent, the biggest year-over-year salary salary increase since 2007. Matthew Broyle, “Inflation, War for Talent Spark Highest Salary Hikes Since 2007: Survey,” Bloomberg News, Nov. 17, 2022.

Neither the Defend Trade Secrets Act nor the Uniform Trade Secrets Act explicitly includes salary information in its definition of “trade secrets.” Instead, both broadly define this term so that information (largely regardless of form) is protected as long as it (1) derives independent economic value, actual or potential, from not being generally known and (2) is subject to reasonable efforts to keep the information secret. 18 U.S.C. § 1839(3); Uniform Trade Secrets Act § 1(4).

The result of this scheme has historically led to mixed results, with the status of salary information remaining largely dependent on the facts and circumstances of the specific case:

  • Salary information has been held to be a trade secret. In Dibble v. Penn State Geisinger Clinic, Inc., 806 A.2d 866 (Pa. Super. Ct. 2002), a Pennsylvania superior court found that documents containing a health maintenance organization’s (HMO’s) compensation plans, compensation distribution formulae, and individual detailed salary histories contained trade secrets under Pennsylvania law. It based this decision on the fact that the HMO had taken adequate measures to safeguard the secrecy of the information, the information was of great value to the HMO and would be valuable to its rivals, and the information was not generally known outside the HMO. The court relied on the definition of “trade secret” contained in Restatement of Torts section 757.
  • Salary information has been held not to be a trade secret: In Wichita Clinic, P.A. v. Columbia/HCA Healthcare Corp., 45 F. Supp. 2d 1164 (D. Kan. 1999), the U.S. District Court for the District of Kansas ruled that a clinic that had formerly employed 13 physicians who went to work for a hospital after termination of employment failed to establish that information relating to physician compensation and productivity was a trade secret. The court said that one basis for its ruling, among others, was that the clinic’s physicians were “permitted to share information about productivity and compensation with anyone.” Id. at 1208.
  • Salary information may or may not constitute a trade secret: In In re Ahern Rentals, Inc., Trade Secret Litigation, 2020 BL 520367, at *11–12 (W.D. Mo. Oct. 29, 2020), a federal district court in Missouri, presented with this question under Washington law, noted that it was unclear whether a firm’s compensation structure and other employment-related information constitute a trade secret. It noted that the parties presented no published cases on the issue of whether a firm’s compensation structure and other employment-related information constitute a trade secret under the Washington UTSA, and the court found no such cases in its own research. It was ultimately unnecessary for the Ahern court to decide this question at the pleadings stage because the plaintiff successfully pleaded the existence of at least one other trade secret, and the court denied the defendant’s motion to dismiss on that basis.

What Can Employers Expect in the Future?

Moving forward, pay transparency laws will undoubtedly make it more difficult for employers to claim that their employees’ salary information constitutes a trade secret. Although case law analyzing the interplay of pay transparency laws and trade secret laws remains sparse, an examination of cases involving other laws, such as those that have the effect of making government or a specialized group of employees’ salaries public, provides useful insight.

For example, in Medical Mutual Insurance Co. v. Bureau of Insurance, 866 A.2d 117 (Me. 2005), the Supreme Judicial Court of Maine was presented with the question of whether certain compensation information from an insurance company was exempted from public disclosure under the Maine Freedom of Access Act. The court was asked to determine whether it fell under Maine’s trade secret privilege (Me. R. Evid. 507) or within the scope of a privilege against discovery due to its trade secret status (Me. R. Civ. P. 26(c)(7)).

A policyholder submitted a Maine Freedom of Access Act request for this information from Maine’s Bureau of Insurance, which began requiring that insurers file certain salary information with it each year as part of annual statements required to be filed with the superintendent of insurance under the Maine Insurance Code. Me. Stat. tit. 24-A, § 423 (2000). The court ultimately held this information was not exempt because the insurance company failed to show that salary information comes within the definition of a trade secret. Specifically, the insurance company “failed to demonstrate [. . . that salary information] had independent economic value from not being generally known and failed to show that it is in fact subject to secrecy.” Id. at 121.

The company’s internal policies did not prohibit employees from disclosing their own salaries, and, as noted at the outset, it was statutorily required to disclose this information to the superintendent of insurance. In cities, counties, and states where pay transparency laws have gone into effect, it will be similarly difficult to argue that employee salary information derives economic value from not being known and is in fact subject to secrecy.

How to Advise Employers

Labor and employment law practitioners should consider what steps they can legally take to keep their employer clients’ salary information secret. For instance, the National Labor Relations Act makes it illegal for an employer (even a non-union employer) to institute a policy that restricts employees from discussing their salaries among themselves. According to the National Labor Relations Board (NLRB), such internal compensation discussions are a “protected concerted activity,” so violating this rule may subject employers to an NLRB complaint. NLRB, St. Louis, Missouri, Case No. 14-CA-26790.

Instead, lawyers representing employers (particularly those in states where pay transparency laws have not yet been passed) should concentrate on taking reasonable measures aimed at ensuring that compensation information remains confidential within the company, such as the following:

  • Requiring employees to sign appropriately tailored confidentiality agreements;
  • Limiting access to salary information to only those who have signed a confidentiality or nondisclosure agreement;
  • Using a company employment manual that discusses the requirement to not disclose compensation information to those outside the company;
  • Stamping or otherwise delineating all documents containing compensation information as “confidential”;
  • Limiting access to information to only those who have a need to know;
  • Keeping physical information under lock and key, installing security cameras, or erecting other physical barriers;
  • Protecting electronically stored information with a password;
  • Setting rules on taking work materials and computers home;
  • Disabling USB ports;
  • Tracking and monitoring the location of information;
  • Conducting exit interviews; and
  • Prohibiting public (i.e., external) posting of company compensation information.

Jeffrey D. Horst et al., “Trade Secret Litigation,” in Georgia Business Litigation, 255, 266–67 (Robert C. Port ed., 2018) (citing B&F Sys., Inc. v. LeBlanc, No. 7:07-CV-192 (HL), 2011 WL 4103576, at *25 (M.D. Ga. Sept. 14, 2011) (suggesting several ways a company could take reasonable efforts to maintain the secrecy of a document)).