The amendments to the Fair Work Act 2009 (Cth) (FW Act) that commenced on 7 December 2022 make significant provision regarding pay secrecy.

What has changed?

The subject of the change is information about an employee’s remuneration, or employment terms and conditions that are reasonably necessary to determine remuneration outcomes. This will include:

• wage or salary rates;
• working hours;
• commission rates;
• bonus criteria (including the key performance indicators that dictate the level of the bonus); and
• fringe benefits such as motor vehicles or access to company-paid mobile phones.

The laws will give employees a workplace right to disclose (or not disclose) pay information. Any legal restrictions on them doing so will cease to have effect. Employers will face civil liability if they seek to impose those restrictions.

Protection for employees

If an employer takes, or threatens to take, adverse action against an employee because they asked another employee to give them pay information, or the employee disclosed pay information to another person (such as a recruiter), the employer will contravene the general protections provided in the FW Act. This will expose the employer to remedial orders, such as awards of compensation, as well as a penalty.

This protection applies even if the request or disclosure occurs after the employee has ceased employment. It also applies when the employee is seeking employment elsewhere and discloses the information to an employee or agent of a prospective new employer. The employee’s employer cannot take, or threaten to take, adverse action against the employee for doing this. Nor can it take, or threaten to take, adverse action against the party receiving that information where the disclosure benefits that party.

This protection will not apply to employees who, at the time the legislation commences, are employed under employment contracts that contain pay secrecy terms. However, the protection will apply if and when the contracts are varied by mutual agreement of the parties. This might be where there is an annual pay increase or a job change.

For those employees employed under contracts that do not contain pay secrecy terms, the protection now applies.

What are pay secrecy terms?

An example of a pay secrecy term is a confidentiality clause that requires employees not to disclose to any third party any information designated to be confidential, and the contract identifies the terms of the contract itself or employee remuneration as a category of confidential information.

A pay secrecy term may arise in an employment contract because the contract requires the employee to observe provisions in an employee handbook or suite of policies, and the latter makes employee remuneration or employment conditions confidential.

Any pay secrecy provision in an enterprise agreement now has no effect. Similarly, any pay secrecy term in a contract of employment entered into on or after 7 December 2022.

Any pay secrecy term in a contract of employment entered into before 7 December 2022 will continue to have effect until the contract is varied.

An employer who, on or after 7 June 2023, enters into an employment contract or other written agreement with an employee that includes a pay secrecy term will be liable to a penalty up to $16,500.

What you should do

Employers should review their template contracts and policies, and remove provisions that would oblige employees to keep pay information secret.