Pay Secrecy Clauses update in Australia

Author: Ian Aldridge, Progressive Legal

Pay secrecy clauses are provisions contained in employment contracts or other industrial instruments that prohibit employees from discussing their salary pay and benefits, employment terms or conditions related to their pay (such as hours of work or loadings). 

What’s the purpose of Pay Secrecy Clauses?

The purpose of pay secrecy clauses is to maintain confidentiality around an employee’s compensation package, which may include sensitive information such as bonuses, stock options, or other financial incentives. Employers may argue that pay secrecy clauses are necessary to protect the company’s competitive advantage, prevent salary disputes, and maintain employee morale. 

What’s the update in relation to Pay Secrecy Clauses in Australia in 2023?

Under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (“the Bill”) that was passed at the end of 2022, employers can no longer include pay secrecy clauses in employment contracts.   

Importantly, the Bill creates a workplace right to disclose their pay and terms and conditions that are related to their pay. Employees can also ask other employees about their pay and conditions.  If an employer acts against an employee for exercising a workplace right, the employee may be able to pursue action against the employer under general protections provisions of the Fair Work Act.   

These provisions came into effect from 7 December 2022.  If a contract issued (or changed) after 7 December 2022 has a pay secrecy clause in it, then the pay secrecy clause has no effect and employers cannot enforce it.  

From 7 June 2023, employers cannot include pay secrecy provisions in their contracts. An employer who enters a contract with a pay secrecy clause is contravening the Fair Work Act 2009 and may be liable for civil penalties.   

If an employee and employer entered into an employment contract before 7 December 2022 and the contract has a pay secrecy provision in it, then that clause will continue to operate until the contract is varied. Once the contract is varied, then the clauses will no longer have effect.   

Employers who contravene the Act may face penalties of up to $66,600 for a corporation. If the contravention is found to be a serious contravention, then the penalty can be up to $666,000.

What can employers do?

Employers should review their employment contracts. Many employers use template contracts. These contracts may include pay secrecy provisions and other outdated clauses. An experienced employment or workplace lawyer will be able to help you review your contracts, identify areas of risk for your business, and redraft your contracts.

However, there are concerns that pay secrecy provisions can be used to silence employees who want to discuss pay disparities and discrimination in the workplace. Employees may be unaware that they are being paid less than their colleagues, and pay secrecy clauses can prevent them from discovering and challenging pay inequality. 

It is important for employees to understand their rights regarding pay secrecy clauses and to seek legal advice if they believe their employer is violating these rights. Additionally, employers should carefully consider whether pay secrecy clauses are necessary and whether they may be harmful to their employees’ morale and well-being. 

Contact Progressive Legal today so that our experienced employment and industrial lawyers can assist you with making sure that your employment contracts are compliant with industrial law changes.