Pay secrecy terms in employment contracts are illegal
Recent changes to pay secrecy laws in Australia mean that it will be illegal for employers to use pay secrecy terms in employment contracts from 7 December 2022. Such clauses usually seek to stop employees discussing how much they are paid, or bonuses, with their colleagues.
The Secure Jobs, Better Pay Act added provisions to the Fair Work Act 2009 that protect employees’ rights to discuss, or not discuss, their pay with any other person, including work colleagues.
The new law also prohibits the use of pay secrecy clauses in contracts of employment, with heavy fines for employers who breach the prohibition. The upshot of these changes is that everyone will soon be free to discuss their pay with whomever they like.
Employer prohibitions on discussing pay in the workplace have been a contentious issue for a long time. In July of 2022, the Federal Circuit and Family Court of Australia considered a case where an employee had discussed salaries and other terms of employment with colleagues. The court held that the employer’s decision to terminate him for breaching their confidentiality policies was reasonable (AMIEU v Primo Foods).
Despite this decision, many employers, including major banks, have recently taken steps to remove pay secrecy clauses from their employment contracts.
One significant critique of pay secrecy clauses relates to the gender pay gap in Australia, which is currently 22.8%, according to data from the Workplace Gender Equity Agency. The argument is that removing the ability of employers to enforce pay secrecy in workplaces will lead to more open discussions that allow women to compare their pay with that of their coworkers and discuss discrepancies without fear of retribution. These open discussions may lead to better pay outcomes for women empowered to bargain for equal pay for equal work.
The new pay secrecy laws provide protection for employees
The Secure Jobs, Better Pay Act has settled the dispute about pay secrecy in favour of transparency, introducing three planks of protection for employees who choose to discuss their pay openly. In introducing the law, Federal Minister for Employment and Workplace Relations, Tony Burke said:
“These clauses have long been used to conceal gender pay discrepancies. Banning them will improve transparency, reduce the risk of gender pay discrimination and empower women to ask their employers for pay rises.”
The pay secrecy protections sit alongside a host of other changes designed to address gender equity in the workplace – including the establishment of two new Fair Work Commission Expert Panels and new powers for the Fair Work Commission to deal with sexual harassment in the workplace.
Employees are not subject to pay secrecy
Under the new law, an employee has the clear right to disclose, or not disclose, their pay as well as any terms and conditions of their employment that are reasonably necessary to determine their pay (such as their hours of work) to any other person. Employees are also protected if they choose to ask others about their pay, and the protections extend beyond the end of the employment period. This means that everyone is free to discuss their pay with any other person under the law.
Pay secrecy terms have no effect
The new law also has the effect of treating any term of an employment contract that purports to impose pay secrecy or would violate an employee’s right to discuss their pay as having no effect. A pay secrecy clause won’t be worth the paper it is written on.
Prohibition and penalties for breach of pay secrecy laws
The ‘teeth’ of the new law is an express prohibition on the use of pay secrecy terms in contracts. Violating this section can carry heavy penalties for employers who try to enforce such illegal terms. The section is a ‘civil remedy provision’, meaning that the maximum penalty for violating this section is $82,500 or up to $825,000 for serious contraventions.
However, the protections in the Secure Jobs, Better Pay Act apply only to contracts of employment entered into or varied on or after 7 December 2022, and the penalties for employers kick in six months after that date.
It is also important to note that nothing in the law requires anyone to disclose their salary to a coworker simply because they are asked. The right to disclose or not disclose pay and conditions lies with the individual employee.
Is discussing my pay a workplace right?
Your exercise of your workplace rights is protected by section 340 of the Fair Work Act 2009, and the new law makes clear that discussing pay is a workplace right. This protection means that if your employer takes adverse action against you for discussing your pay, they may also be liable for penalties under the general protections provisions of the Fair Work Act.
his means that even if your employment contract predates 7 December 2022, your right to discuss your pay may still be protected.
Get help from an employment lawyer
If your employer has told you that you cannot discuss your pay with others, they may be contravening your workplace rights. Book a consultation with one of our award-winning employment lawyers to confidentially discuss the matter.
Contacting Hall Payne Lawyers
You can contact us by phone or email to arrange your consultation; either face-to-face at one of our offices, by telephone or by videoconference consultation.
This article relates to Australian law; either at a State or Federal level.
The information contained on this site is for general guidance only. No person should act or refrain from acting on the basis of such information. Appropriate professional advice should be sought based upon your particular circumstances. For further information, please do not hesitate to contact Hall Payne Lawyers.