New Brunswick Pay Transparency legislation: Psychologist first, Lawyer after
© Kelly VanBuskirk, KC, PhD, C. Arb. 2026-04-10
The New Brunswick Legislature has now gotten in line with other western governments to roll out Pay Transparency legislation. Bill 24 was introduced on March 18th with the objective of eliminating systemic pay disparities. While some law firms are encouraging employers to call their lawyers now to begin preparing for the new requirements, at VanBuskirk Law we’re proposing this approach:
Call an organizational or sports psychologist first, call us later.
Here’s why:
Lawyers will become more helpful as the details of the legislation and regulations emerge. Right now, there are too many unknowns about the legislation (and, importantly, the regulations). Designing your pay transparency program now would mean that you will likely have to adjust it later, especially if the government tries to patch some of the truck-sized holes in the current bill (see below). In our view, a better use of employer resources is to develop an understanding of the organizational risks and opportunities that come with disclosing your employees’ salaries. In business, the motivating and demotivating psychology behind pay transparency should be the current focus.
The research in Pay Transparency
When obligations under the Pay Transparency legislation take effect a year or two from now, your employees’ salary information will have to be hung up on the proverbial laundry line for all to see. Obviously, that could create some hard feelings in your workplace, and the literature confirms that there will be some motivating and demotivating consequences. We want our business clients to take advantage of the organizational benefits of pay transparency, while mitigating the risks.
Years ago, I taught a university course called Evaluating and Rewarding Employee Performance. That topic is a science into itself and, in the face of pay transparency legislation, New Brunswick employers may have to become more scientific in their organizational strategy and management.
Harvard researcher Zoey Cullen and her colleagues are amongst those who have examined the organizational effects of pay transparency, and its those that will cause the longest lasting concern for employers. The literature generally indicates that, in comparison to peers, the illumination of underpayment may precipitate reduced motivation and effort, while disclosure of overpayment may have the opposite effect.
The psychology
Pay transparency has complex effects on employee motivation and effort. While horizontal transparency (intra-company, peer-to-peer disclosures) can lead to reduced morale and effort due to perceptions of unfairness, cross-company (in the entire marketplace) and vertical (across different levels of seniority) transparency often enhance motivation by providing clarity on career progression and potential earnings. However, the overall impact depends on the design of the transparency policy and the perceived fairness of the work environment.[1]
The Economics
You may be wondering how disclosure of salaries in your organization will impact your negotiations with new and existing employees. The literature exposes significant complexities, as highlighted by Cullen and Pakzad-Hurson in their discussion of Equilibrium Theory and pay transparency:
Mechanically, transparency provides information that workers can exploit in renegotiations. In some cases, it can also increase the likelihood a wage renegotiation occurs at all. Both of these alter the de facto bargaining power through two equilibrium effects: a demand effect and a supply effect. As transparency rises, the firm’s maximum willingness to pay for labor falls because information about one worker’s pay raise spreads more quickly to others, who use that information to renegotiate (demand effect). At the same time, workers make lower initial wage offers to increase their chances of getting hired (supply effect). Because workers expect to quickly learn the wages of others and renegotiate with higher transparency, they are less concerned with securing a high initial wage.[2]
The NHL’s Experience
There are likely some cautionary lessons to be learned from the NHL about pay transparency in business.
In 1990, the NHL disclosed its player salaries. Players finally learned that some of their teammates were making a lot more money than they were. Did pay transparency cause some players to work harder? Yes. Did all of those players direct their increased efforts toward the best interests of the team? No.
In his research into the motivational effects of that transparency, James Flynn[3] found that players who perceived themselves as underpaid often reallocated their efforts from attentiveness to defensive statistical outputs to greater focus on offence, because offensive production was perceived as having higher individual value for the players’ next salary negotiation.
When players discovered they were underpaid, they became less motivated to maximize overall team success and more motivated to increase their future contract value. This reflects a shift from organizational goals to personal economic incentives once pay comparisons became visible.
In the NHL, Players’ Efforts were Reallocated, Not Reduced
Underpaid players did not stop trying. Instead, they reallocated their effort toward activities that are more visible and better rewarded in the NHL labor market:
Goals scored increased significantly
Assists rose slightly
Defensive performance declined, leading to more goals conceded by their teams
This shows that pay transparency can distort performance by encouraging workers to focus on measurable, rewarded outputs at the expense of less visible but equally important tasks.
When players discovered they were underpaid, they became less motivated to maximize overall team success and more motivated to increase their future contract value. This reflects a shift from organizational goals to personal economic incentives once pay comparisons became visible.
Players who learned they were overpaid showed no significant change in effort, motivation, or style of play following salary disclosure. They continued allocating effort in ways that maximized team performance rather than personal gain.
Net Negative Effect on Team Achievement
Although underpaid players improved their offensive statistics, teams suffered because the decline in defensive effort outweighed those gains. As a result, team outcomes worsened, because these players allowed opponents to score more goals than they generated themselves.
Payroll–Performance Link Emerges After Transparency
Before salaries were made public, team payroll and performance were unrelated. After salary disclosure, higher-paying teams consistently outperformed lower-paying teams, and this relationship became both immediate and permanent.
Because free agency rules limited player movement at the time, this improvement cannot be explained by better players self-selecting into richer teams. Instead, it indicates that higher pay helped maintain internal motivation and effort alignment once salaries were transparent.
Bottom Line
Flynn’s study of the NHL’s pay transparency program suggests that pay transparency may:
Change employee motivation, not by increasing or decreasing effort overall, but by altering what workers choose to focus on
Improve outcomes only when compensation is perceived as fair
Reduce achievement and performance in environments where workers feel underpaid
Create asymmetric behavioral effects, strongly affecting underpaid workers while leaving overpaid workers largely unchanged.
[1] Cullen, Zoe B. 2023. “Is Pay Transparency Good?” National Bureau of Economic Research, Working Paper 31060 DOI 10.3386/w31060.
[2] Cullen, Zoe B. and Bobak Pakzad-Hurson. 2022. “Equilibrium effects of Pay Transparency”. National Bureau of Economic Research, Working Paper 28903.
[3] Flynn, James. 2022. Salary disclosure and individual effort: Evidence from the National Hockey League, Journal of Economic Behavior & Organization. 202. 471-497.