Pay secrecy clauses now prohibited – one of many changes courtesy of the Secure Jobs, Better Pay Act

Background

With the recent passing through both houses of Parliament of new legislation in the form of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act), a raft of changes to the Australia workplace relations landscape are already in effect. One important change is a ban on employer’s having ‘pay secrecy’ clauses in its employment contracts. These are clauses which prohibit employees from talking about and sharing their salary information.    

Prior to the introduction of the Act, employers could use and enforce pay secrecy clauses with the aim to minimise employees comparing their entitlements with others and pushing for pay rises. Any employees found to have disclosed this information with others could face disciplinary action including warnings and even dismissal for breach of contract.  

The changes

The amendment introduced by the Act will create a new workplace right in the Fair Work Act 2009 (Cth), allowing employees to speak about and disclose to other employees their remuneration and other related conditions which are ‘reasonably necessary to determine remuneration outcomes’. By no means will employees be obliged to disclose this kind of information, their pay information can still be kept secret if they wish, and the choice will now lie with the employee rather than the employer. The effect of this being a workplace right is that employees will be protected from adverse action by employer’s for asking or speaking with others about these matters. A non-exhaustive example besides an exact amount of pay is enquiring about ordinary hours of work, because two employees could work the same role for the same remuneration however one works considerably less hours. A person would also remain entitled to exercise their right in this regard even after they stop working at the particular workplace, meaning they can continue to choose to disclose their past remuneration even if they are no longer employed at that workplace.

To ensure these new employee rights are enforced and protected, pay secrecy clauses will be expressly prohibited from being included in employment contracts and other written agreements such as enterprise agreements. If a term is included that is inconsistent with an employee’s right to speak about remuneration, then it will have no effect. An employer who is found to have contravened these new provisions around pay secrecy could be liable for civil penalties of up to 600 penalty units (a fine of approx. $110,000).

Rationale behind the changes

The prohibition on pay secrecy clauses will provide employees the choice to gather information about their workplace’s range of pay if they wish. Employees could then use this information to determine whether they are being paid fairly and comparably to other employees in similar roles or industries. Ideally, this will lead to more competitive wage outcomes for employees and provide them with greater bargaining power to ensure a fair outcome.

Another main objective of the changes is to reduce actual or perceived inequality in relation to gender pay gaps. Giving employees the ability to discuss their remuneration aims to promote the rights of women not to be discriminated against based on gender by allowing them to confirm they are not being paid inconsistently compared to male employees for doing the same job. This transparency should create greater accountability for employers to eliminate any discrimination of this kind in their workplaces.

A further outcome is that the changes may open up the ability for Unions to articulate consistent wage claims particularly where certain employees are paid above EA and Award rates due to “historic precedent”.

Key Takeaways

Going forward, pay secrecy clauses are not permitted in any circumstances and the consequences for an employer who contravenes these new provisions can be rather severe. The Federal Government is clear in its intention through these changes that the days of employers relying on pay secrecy to minimise ‘conflict’ between employees are gone and better pay outcomes are needed for many employees through greater transparency and accountability.

Employers should begin a thorough review of their employment agreements and associated instruments to ensure there are no elements of pay secrecy.

Employers should also consider an audit of pay for comparable employee groups so as to minimise inequalities in pay by reason of gender or length of service.

This amendment is only one of many contained in the Act which will provide a lot for employers to think about over the next 12 months. If your workplace requires assistance with pay secrecy clauses in your employment agreements or the new legislation in general, please contact:

Jim Babalis
Special Counsel
T 03 5225 5205
E jbabalis@ha.legal

Jim Rutherford
Principal Lawyer
T 03 5226 8579
E: jrutherford@ha.legal

Sonia McCabe
Senior Associate
T 03 5226 8558
E: smccabe@ha.legal

Matthew Synoradzki
Graduate Lawyer
T 03 5226 8542
E msynoradzki@ha.legal