The $ecret’s out - pay secrecy prohibition taking effect 7 June 2023

The secret’s out!

The prohibition on employers entering into an employment contract or written agreement containing a pay secrecy provision will take effect from 7 June 2023.

The prohibition is intended to increase transparency and accountability in the workplace, in an attempt to address the gender pay gap which the ABS reported in February 2023 to currently sit at 13.3%.

You will recall that from December 2022, the Fair Work Act was amended to introduce pay secrecy provisions.  The amendment introduced Division 4, section 333B of the Fair Work Act - a workplace right for employees to disclose information about their remuneration (and any terms and conditions that are reasonably necessary to determine remuneration outcomes, such as the number of hours worked), and a right to ask other employees about their remuneration. As you would already know, employees are protected from adverse action being taken against them for exercising workplace rights, so an employer cannot take adverse action against employees who choose to disclose their remuneration details or ask other employees to do so. 

WHAT THIS MEANS?

From 7 June 2023, pay secrecy provisions in an employment agreement are out (including agreements entered since 7 December 2022). It will be an offence to include a pay secrecy clause in any employment contract or other written agreement with an employee.

Penalties reaching $82,500 per contravention or $825,000 for very serious, wilful contraventions, apply. 

However, pay secrecy clauses in employment contracts entered into before 7 December 2022 will remain in effect until such time as the agreement is changed or varied, at which point the provision must then be removed and can no longer be enforced.

What about other written agreements with employees?

Employment contracts are not the only agreement employers enter into with employees.

Section 333D contemplates “a contract of employment or other written agreement”. Unhelpfully, the Fair Work Act does not currently define remuneration or what comprises it. This means other documents such as deeds of release and employee share option plans may be captured by this change, depending on their terms.

EMPLOYERS SHOULD

• Check your employment contract templates and remove anything that requires employees to keep their remuneration or related terms thereof confidential. As a starting point, check your remuneration clauses and confidentiality clauses.

• Consider workplace policies addressing confidentiality, remuneration and pay reviews.

• Consider whether any employment agreement issued on or after 7 December 2022 contained pay secrecy provisions, in which case it ought to be varied to remove the offending provision (notwithstanding that the provision will be of no effect).

• Check your employee share plans and be mindful of this when entering into other written agreements.

Feel free to get in touch if you have any questions or would like some assistance with reviewing and amending your employment contract templates.

Inside Eagles acknowledges the Gadigal people of the Eora Nation, the traditional custodians of this land and we pay our respects to Elders past, present and emerging.