Australia: Prohibitions on pay secrecy in employment contracts

Prohibitions on pay secrecy in employment contracts have been a part of federal workplace law since the enactment of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth).

These new provisions in the Fair Work Act commenced on the day after the SJBP Act was enacted, i.e. 7 December 2022, and hence are in effect already. This article provides a general overview of new statutory provisions and the transitional provisions that are of significance.

General overview of new statutory provisions

Part 7 in Schedule 1 of the SJBP Act inserts a new Division 4 into Part 2-9 of Chapter 2 of the FW Act, the Division being entitled "Prohibiting Pay Secrecy".

Division 4 inserts three new sections into the FW Act, being Sections 333B to 333D, concerning the subject of pay secrecy.

Section 333B gives an employee the right to disclose their remuneration and related information about their remuneration to anyone else, and also gives the employee the right to ask other employees about their remuneration. [It should be noted immediately that this section confers on an employee the right to disclose their remuneration and to enquire about others' remuneration, but does not impose any obligation on any employee to disclose their remuneration to anyone.]

Section 333C renders any contract term inconsistent with Section 333B ineffective.

Section 333D makes it an offence for an employer to enter into a contract with an employee that has a term inconsistent with the rights of an employee given by Section 333B.

These provisions are one of the measures the Federal Government has brought into law to assist the implementation of its general industrial relations/economic policy of "getting wages going again" - i.e., if employees are not precluded from discussing their pay with other employees (employed with the same employer or employed elsewhere) then that might empower employees in negotiations over pay with their employers. These are also provisions that support gender equity, another major policy underlying the SJBP Act (in that the removal of pay secrecy in contracts may assist women in pursuing pay equity with their male counterparts).

Transitional provisions are of significance

While these provisions appear relatively straightforward, regard must be had to the effect of the transitional provisions in the SJBP Act - found at Item 59 in Part 26. That is:

• The new Division apply to contracts entered into on and after 7 December 2022, i.e. prospectively, as would normally be expected with new legislation;
• However, the new provisions also have a form of retrospectivity - i.e. if a contract entered into before 7 December 2022 included terms that imposed pay secrecy on an employee, those terms would continue to apply to the employee and the employer after 7 December 2022 until the next time that the contract was varied (e.g. the next time an employee is promoted to a new role or remuneration in the contract is uplifted), at which time the pay secrecy provisions in the contract would cease to have effect.

Employers will need to examine their contracts with existing employees, and any template contracts that they use for new employees, to ascertain whether pay secrecy provisions are in those instruments (including within clauses relating to "confidential information"), and thereby clarify whether such provisions need to be varied or removed to ensure compliance with the new Division.

Practical application/implications - article to come

A more practical analysis of the new Division will be provided in a separate article by one of our workplace law partners, Michael Barnes, in the near future.

Footnotes

¹Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) ("SJBP Act"), Part 7 in Schedule 1.

²Fair Work Act 2009 (Cth) ("FW Act").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.