Introduction of Pay Secrecy Provisions which prohibit pay secrecy clauses
Introduction of Pay Secrecy Provisions which prohibit pay secrecy clauses
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amending Act) gained assent on 6 December 2022, amending the Fair Work Act 2009 (FW Act), and consequently implementing significant industrial relations reform.
In particular, employers should be aware that the Amending Act introduced ‘Pay Secrecy Provisions’ to the FW Act.
What is a pay secrecy clause?
Prior to the introduction of the Pay Secrecy Provisions, it has been fairly common for a contract of employment to include a pay secrecy clause which obliges the employee to keep confidential, and expressly prohibits them from making any disclosure of, their remuneration or related terms and conditions of employment to a third party (including other employees), both during the term of their employment and after it ends.
What is the effect of the new Pay Secrecy Provisions?
The new Pay Secrecy Provisions operate so as to make it a workplace right (Remuneration Disclosure Rights) for an employee to disclose (or not disclose) to, or request another employee to make disclosure of:
(a) the employee’s remuneration; and
(b) any terms and conditions of the employee’s employment that are reasonably necessary to determine remuneration outcomes (for instance hours worked, on-call/shift-work requirements, sales numbers).
Importantly, the Pay Secrecy Provisions provide that any term included in a contract of employment which is inconsistent with an employee’s Remuneration Disclosure Rights, such as a pay secrecy clause, will have no force or effect. However, where an existing contract of employment that was entered into prior to 7 December 2022 includes a pay secrecy clause, that pay secrecy clause will continue to have effect, until such time as that contract of employment is varied or otherwise replaced.
Furthermore, should an employer enter into a contract of employment (or any collateral contract) which includes a term inconsistent with the employee’s Remuneration Disclosure Rights, that act will now constitute a breach of the civil remedy provisions under the FW Act.
Short Grace Period
In respect of the above-mentioned civil remedy provisions, the Amending Act operates such that an employer will not be liable for any consequential civil (financial) penalty should it be found to be in breach prior to 7 June 2023 (Grace Period). However, significant civil penalties may be imposed should an employer be found to be in breach after the Grace Period has lapsed.
General Protections Regime
It is equally important to note that the Pay Secrecy Provisions expressly provide that the Remuneration Disclosure Rights constitute ‘workplace rights’ for the purpose of the general protections regime. Accordingly, an employer must not take any ‘adverse action’ or otherwise discriminate against an employee who exercises or proposes to exercise a Remuneration Disclosure Right.
The practical effect arising from the introduction of the Pay Secrecy Provisions for employers is that:
(a) any pay secrecy clause included in a contract of employment which is entered into or varied on or after 7 December 2022 and is inconsistent with Remuneration Disclosure Rights will be invalid; and
(b) where an employer enters into, or varies, a contract of employment which includes a pay secrecy clause which is inconsistent with a Remuneration Disclosure Right, the employer may subsequently become liable for significant civil penalties.
Employers should undertake a review
Employers should urgently review their standard form contracts of employment so as to ensure that they do not include a pay secrecy clause in breach of the Pay Secrecy Provisions.
If you would like to know more about the Pay Secrecy Provisions or a review of your employment contracts to ensure that they do not include a pay secrecy clause in breach of the Pay Secrecy Provisions, please contact one of our lawyers listed below.
Chris Pollard
(03) 9612 7318
Christopher.Pollard@wisemah.com.au
Hayden Bateman
(03) 5223 7500
Tooba Khaliqy
(03) 9612 7236
