The IR landscape in Australia is changing rapidly.
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 which commenced in December 2022 introduced a raft of changes which the Government hopes will achieve a number of policy objectives including stimulating wage growth, improving job security and address systemic gender-related inequity.
Some of the changes were effective immediately, whereas others are rolling out over the course of 2023. One of the changes introduced in December 2022 relates to the prohibition of pay secrecy clauses, which is the focus of this article.
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Pay secrecy/confidentiality clauses in employment contracts and related policies have been commonplace for many years. They effectively act as a protection measure for employers by prohibiting employees revealing or discussing details of their pay and conditions with others, including other employees. The Government’s view is that restricting access to this information reduces the opportunity for employees to compare pay and conditions with their colleagues (and others outside the business), and therein reduces their capacity to advocate for better pay and conditions, which potentially then sustains or exacerbates discrimination and the gender pay gap.
The new legislation prohibits employers from:
- including pay secrecy/confidentiality clauses in new and varied employment contracts, and
- taking adverse action against any employee who requests or discloses remuneration-related information to others.
The changes apply to new and varied contracts – in other words, a contract entered into prior to 7th December 2022 does not need to be changed (and continues to operate), however, if there is a need to issue that employee with a new or varied contract, any pay-related secrecy clauses needs to be removed.
It is important to note that under these changes, employees are free to choose whether or not to discuss and reveal their pay to others and are protected from adverse action if they exercise the right to disclose (or not disclose) their remuneration AND/OR ask others about their remuneration. There is no positive obligation to disclose if asked, and employers are not expected to disclose employee remuneration.
The legislation includes a six-month transitional period for employers to implement the changes. Significant penalties may be applied, from 7th June 2023 onwards, to any employer who continues to include pay secrecy terms in new or varied contracts of employment (or who take adverse action against an employee exercising their right to ask other about their remuneration, disclose or not disclose their remuneration). Any pay secrecy terms in contracts will also be considered void.
Note that the legislation only relates to pay secrecy/confidentiality. Employers are quite entitled to continue to include terms in contracts relating to, for example, confidentiality of business operations/customers/pricing, protection of intellectual property etc…
Employers: What you need to do:
- Ensure that any new or varied contracts of employment DO NOT contain pay secrecy clauses, and
- Be sure to NOT take adverse action against any employee who asks other employees about their remuneration arrangements, or any employee who elects to disclose, or elects not to disclose, information relevant to their remuneration.
Note that if you propose to take any adverse action against a staff member employed prior to 7th December 2022 who discloses pay-related information (and who may still have operative pay secrecy provisions in their contract of employment), we strongly suggest you seek further advice before acting.
Note that this is general information only, not formal or legal advice. Information is current and we believe accurate at the time of publication – 07/03/2023.