Many small to medium businesses have existing employment contracts that restrict their employees from discussing their salaries with co-workers.
Previously, this was an acceptable practice however it has become apparent that in some workplaces the practices were very much the opposite.
In an attempt to close the gender pay gap, the Federal Government has introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act, which prohibits pay secrecy clauses in employment contracts.
What does this mean for employees?
Under the change, employees now have the right to:
- Share information, if they choose to, about their pay and conditions of employment with other employees
- Ask other employees about their pay and conditions of employment.
Although an employee’s right to disclose has changed, it does not mean they can be forced to share this information if they don’t want to.
Employees are not obliged to keep this information confidential even after they leave their employment.
What does this mean for employers?
It is unlawful for employers to include pay secrecy clauses in employment contracts from 7 December 2022. From 7 June 2023, if pay secrecy clauses that are inconsistent with the new workplace rights are included in employment contracts that have been entered into, on or after 7 December 2022, those clauses will have no effect and employers could face penalties for enforcing them.
For pre-existing employment contracts that do contain a secrecy clause, these clauses will remain in effect until such a time the contracts are varied. This means that employees employed under pre-existing contracts that have a secrecy clause are still bound by it, and it can be enforced by an employer.
Once a contract is changed (a new contract) these clauses will no longer have effect and can’t be enforced. The pay secrecy clause should not appear in the contract in relation to any new employees commencing after 7 December 2022.
Employers should use the six-month grace period to review employment contracts and ensure that any employment contracts entered into on or after 7 December 2022 are consistent with the new workplace rights. That is, they do not contain a secrecy clause restricting an employee’s rights to disclose information about their pay and conditions of employment.
There is also a six-month grace period for employers before they can be exposed to penalties for including pay secrecy clauses in new contracts entered into on or after 7 December 2022.