Pay secrecy laws come into effect

On 2 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amending Act) was passed by both houses of parliament.  The substantive parts of the Amending Act come into effect on 6 December 2022.  Whilst the Amending Act contained a multiplicity of provisions relating to things such as the abolishment of the Australian, Building and Construction Commission for example two (2) of the amendments that will impact most Australian employers are the new pay secrecy provisions, the obligations on advertising rates of pay and paid family and domestic violence leave   This article discusses pay secrecy laws and the advertising rates of pay.

Relevant objectives of the Amending Act relating to pay secrecy

The Amending Act amends the Fair Work Act 2009 (Cth) (Fair Work Act) to change various existing rules and to implement a range of new workplace laws.  Relevantly, in relation to pay secrecy the Second Reading Speech stated:

• pay equity issues arising in the workplace will be addressed by prohibiting pay secrecy clauses;
• the Amending Act will provide stronger protection for workers by making it unlawful for employers to advertise a job for less than the minimum wage.

What is a pay secrecy clause?

A pay secrecy clause is a clause in a contract of employment that prohibits an employee from disclosing their pay with colleagues (Pay Secrecy Clause).   Section 382 of the Amending Act, amends section 333B of the Fair Work Act to prohibit such clauses.   New section 333B took effect on 7 December 2022 and relevantly states:

Division 4—Prohibiting pay secrecy

333B  Employees not subject to pay secrecy

             (1)  An employee may disclose, or not disclose, any of the following information to any other person:

                     (a)  the employee’s remuneration;

                     (b)  any terms and conditions of the employee’s employment that are reasonably necessary to determine  remuneration outcomes.

Example:    A condition of an employee’s employment that may be reasonably necessary to determine remuneration outcomes includes the number of hours that the employee works.

             (2)  An employee may ask any other employee (whether employed by the same employer or a different employer) about any of the following information:

                     (a)  the other employee’s remuneration;

                     (b)  any terms and conditions of the other employee’s employment that are reasonably necessary to determine remuneration outcomes.

             (3)  For the avoidance of doubt:

                     (a)  each of the rights in subsections (1) and (2) is a workplace right within the meaning of Part 3‑1; and

                     (b)  a person is not prevented from exercising any of those workplace rights because the person, or another person, is no longer an employee of an employer.

Note 1:   The general protections provisions in Part 3‑1 also prohibit the taking of adverse action by an employer against an employee because of a workplace right of the employee under this Division.

Note 2:   See subsection 341(3) for the extension of workplace rights to prospective employees.

The amendment has created rights for employees to:

• share information about their pay with other employees if they choose;
• share information about the terms and conditions of their contract of employment, which are required to determine their remuneration;
• other employees about their pay; and
• ask other employees about their terms and conditions of their contract of employment, which are required to determine their remuneration.

What is a job advertisement?

A job advertisement (job ad) refers to a written, typed or broadcasted announcement that invites members of the public to inquire about an ­­­advertised position.  A job ad generally includes a description of the role, minimum requirements, contact details and a description of the pay rate.

New rules on job ads

In section 656 of the Amending Act, an amendment is made to section 536AA of the Fair Work Act to address  the new obligations imposed on employers in relation to job advertisements.  It specifies:

Division 4—Employer obligations in relation to advertising rates of pay

536AA  Employer obligations in relation to advertising rates of pay

Employers must not advertise employment with rate of pay that contravenes this Act or a fair work instrument

             (1)  An employer must not advertise, or cause to be advertised, that the employer is offering employment at a rate of pay that would contravene either of the following, if the advertised employment occurred:

                     (a)  this Act;

                     (b)  a fair work instrument.

Note:          This subsection is a civil remedy provision (see Part 4‑1).

Advertisement of piecework must include any periodic rate of pay to which pieceworker is entitled

             (2)  If:

                     (a)  an employer advertises, or causes to be advertised, that the employer is offering employment as a pieceworker; and

                     (b)  the employee would be entitled to a periodic rate of pay, if the advertised employment occurred;

                      the advertisement must:

                     (c)  specify that rate of pay (or a higher rate of pay); or

                     (d)  include a statement to the effect that a periodic rate of pay is payable in relation to the                                         employment.

Note: This subsection is a civil remedy provision (see Part 4‑1).

Reasonable excuse

(3)  Subsections (1) and (2) do not apply if the employer has a reasonable excuse

What do pay secrecy clauses mean for Australian employers?

The Amending Act applies to all Australian employers and will have the following implications:

• employers cannot take adverse action on employees for exercising the rights listed in new section 33above or to prevent employees from exercising these rights;
• pay secrecy clauses in contracts that commenced prior to 7 December 2022 are void;
• employers who have pay secrecy terms in their contracts that are inconsistent with the new amendments can face penalties from the Fair Work Ombudsman Compliance and Enforcement Policy;
• employers need to amend their employment contracts to remove any clauses that could be seen to be a ‘pay secrecy clause’’;
• the advertising amendment applies from 7 January 2023, regardless of the original date the advertisement was publicised;
• employers will be penalised for breaching these provisions, except if they provide a reasonable explanation for their non-compliance;
• employers should review their advertised job listings to ensure that any job advertisements specify remuneration accurately.

What are the implications for employers who want to keep their remuneration strategies confidential?

One of the stated principles of the Amending Act is to promote pay equity by removing confidentiality about remuneration between employees.  Businesses with clauses in their standard form employment contracts to the effect that “your remuneration is confidential and must not be disclosed to anyone except your professional advisers’’ risk having that clause struck out or worse.

Employers need take care to protect the disclosure of confidential information by ensuring they permit such disclosure only where it is “reasonably necessary to determine remuneration outcomes”.

Links and further references

Legislation

Fair Work Act 2009 (Cth)

Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022

Further information 

If you are an employer and need advice on the obligations imposed by the Amending Act and how to comply with the Pay Secrecy laws, contact us for a confidential and obligation free and discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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