On 6 December 2022, the Fair Work Legislation Amendment (Secure Jobs Better Pay) Act 2002 (Cth) passed through Federal Parliament resulting in a number of amendments to the Fair Work Act 2009 (Cth) (the FW Act). Amongst other changes, the amendments to the FW Act now prohibit employers from including pay secrecy clauses in contracts of employment with their employees.
Previously, employers could include clauses in their employment contracts prohibiting employees from both disclosing their remuneration (including, but not limited to, their annual salary and any bonuses the employee was eligible to receive) and making inquiries about other employees’ remuneration.
The proposed changes are part of the Federal Government’s plan to take positive steps to reduce the gender pay gap and create parity and equality in relation to employee wages in the workplace. Federal Minister for Employment and Workplace Relations, Tony Burke, said that it was hoped the pay secrecy change would “empower women to ask their employers for pay rises.”
Are Employees Now Compelled to Reveal Their Salary?
In short, no. The amendments do not compel employees to disclose their hourly wage or annual salary, nor do the amendments permit employees to enquire with human resources or payroll departments about what other employees in the workplace are earning. Rather, the amendments establish a workplace right for employees to ask other employees about their remuneration arrangements and to disclose or not to disclose their own remuneration arrangements if asked by another employee.
It is a matter for each individual employee as to how they answer a question from another employee about their remuneration.
Awards and Enterprise Agreements
Pay secrecy clauses contained in a modern award or enterprise agreement cannot be relied upon by an employer and are void and unenforceable effective from 6 December 2022.
In what is believed to be the first decision by the Fair Work Commission on this issue, Deputy President Dobson of the Commission recently declined an employer’s request to redact a commercially sensitive list of clients included in a proposed enterprise agreement in the course of the application to approve the agreement on the basis that granting the employer’s request and requiring employees not to disclose the relevant clause in the agreement (which determined overtime penalties with reference to whether the work being performed related to a client on the list or not) would result in a contravention of the pay secrecy provisions in the FW Act: Equans Electrical And Communications Pty Ltd [2023] FWCA 1705.
Contracts Entered into Prior to 6 December 2022
Any pay secrecy terms in contracts entered into prior to 6 December 2022 will continue to operate until the terms of the contract are amended or varied.
If the employment contract is amended or varied in any way (for example, due to a promotion or pay rise), the existing pay secrecy clause will become unenforceable.
Contracts Entered into Between 6 December 2022 and 6 June 2023
A pay secrecy clause included in an employment contract entered into between 6 December 2022 and 6 June 2023 is unenforceable. However, during this period, employers will not be subject to the civil penalties for entering into such contracts.
Contracts Entered into After 6 June 2023
A pay secrecy clause included in an employment contract entered into on or after 6 June 2023 is unenforceable.
In addition, employers who include pay secrecy clauses in employment contracts on or after 6 June 2023 may face civil penalties of up to $93,900 for corporations (or for serious contraventions of the FW Act, up to $939,000) per offence. Individuals knowingly involved in the contravention may face penalties of up to $18,780 (or $187,800 in the case of serious contraventions) per offence.
It is therefore critical for employers to take the opportunity to review their existing employment contracts to ensure they do not contain any clauses pertaining to pay secrecy.
What Employers Need to Do
Ensure that you review your current employment contracts, identifying which employees have enforceable pay secrecy clauses in their contracts and ensuring that moving forward, all future contracts do not contain any clause pertaining to pay secrecy.
For advice on implementing these changes and ensuring your business is using compliant contracts of employment, please contact us by telephone or email.
Written by Henry Coventry and Nicole Dunn