"John will ask why Sandy is making more. The truth is that Sandy is more productive, and saying that to John will lead to friction. John will either need to make more money (which will piss off Sandy), or Sandy will need to get promoted to the same level as her manager (which will piss off her manager because what is she going to do now?). So who do we piss off? Wait, why do we need to piss off anyone - let's just keep the salaries private."
The real problem for companies is when the explanation comes down to "Sandy negotiated harder than you", "Sandy got a higher offer from a competitor so we had to match it to keep her", "we're paying you significantly under the market rate and are hoping you don't notice or aren't too bothered by it", etc.
What is much harder to accept, and builds resentment and apathy, is something that feels arbitrary or unjust.
It's illegal to pay differently on the basis of sex, race, or other protected classes. It's perfectly legal to pay differently on the basis of performance or anything that isn't a protected class.
The vast, vast majority of workplaces in America pay people at the same level different amounts.
https://www.costanzo-law.com/google-hit-with-lawsuit-over-cl...
Perhaps the more productive worker is more productive because their work is not high-visibility. Maybe it's the arbitrary luck of having been assigned a more successful project.
Depending on what you mean by "equivalent", yes it could make some claims of discrimination based on race/sex/etc slightly harder to defend against. It does not "open" a company to lawsuits as opposed to being closed to suits by paying equivalent wages. It is one of many many things that could be a factor in such cases. And a lot of companies decide it is worthwhile to do despite that.
> You can and should ask your peers what they make. This is totally legal and encouraged.
It's not encouraged by many companies, and some try to discourage it including by trying to get employees to agree not to, whether or not it's legal.
Like if you're able to describe how Sandy is more valuable, you can describe that to John, and he can emulate it, and everybody wins.
But the biggest problem is that if you wanted this "fixed", you can only raise salaries of people who make too little. Lowering salaries of people who make too much is usually a legal impossibility.
So the effect will be that you risk ending up overpaying everybody instead of only an outlier now and then.
Perhaps that's what these laws are attempting to address ;)
What law is this? I have never heard of it in any US jurisdiction.
In the event there is a contract, unless the contract specifies compensation for terminating employment, the employer can always just terminate the employee for the reason of “this employee is no longer worth $x per hour/year to us”. Barring any other union agreements of course.
These secret decisions are not commonly rational like that. Maybe Sandy keeps quiet when they know the boss is wrong and leaves it to John to speak up and stop the whole thing going over the cliff edge.
This system is doomed long-term if it only works because of information imbalance, since ways will be found around that (levels.fyi, random walk across employers, ...).
What makes you think people always discuss salary? Because it seems rational from a negotiating standpoint?