A number of changes to workplace relations law have recently been introduced by the Commonwealth Government and are taking effect on a gradual basis. One of these key changes to the Fair Work Act  provides and protects a legal right for employees to discuss their remuneration with other people.

“Pay Secrecy” clauses, terms of employment agreements which prohibit the employee from discussing their remuneration (pay) and other matters such as their hours of work, have now been phased out of Australian workplaces.

The law regarding Pay Secrecy terms varies depending on when an employment agreement was entered into.

When Pay Secrecy terms are a breach of law

Employment agreements signed on or after 7 June 2023 must not contain any term which could be perceived as a Pay Secrecy clause. If you issue a new or amended employment agreement which contains a Pay Secrecy clause after this date, this would be regarded as a breach of the Fair Work Act and as an employer you may face financial penalties.  This would include issuing a letter to an employee varying their remuneration, without changing the other terms and conditions of their employment.

When Pay Secrecy terms are not enforceable

Employment agreements formed between 7 December 2022 and 6 June 2023 which contain a Pay Secrecy clause will not be a breach of the Fair Work Act, but the Pay Secrecy clause will not be enforceable. In other words, the employee is free to discuss their remuneration and hours with other people, despite what their employment agreement says.

When Pay Secrecy terms are enforceable

Where an employee has an employment agreement dated prior to 7 December 2022, the clause will continue to operate up to the point that a variation is made to the employment agreement. Once the agreement has been varied, any Pay Secrecy clause will be unenforceable.  A variation to an employment agreement, can include simply increasing an employee’s salary or hourly rate and confirming that in a letter.

Enterprise agreements

Pay Secrecy terms in an enterprise agreement now have no effect and cannot be enforced regardless of whether the agreement was made before or after 7 December.

Policies

An employee’s entitlement to discuss their remuneration is a workplace right, this means that an employer can not take an adverse action against the employee if they exercise that right. We would advise that any Pay Secrecy terms that are in existing policies should not be enforced and should be removed to avoid any potential issues.

What to do

Businesses should ensure that all contracts and policies do not contain pay secrecy provisions.

This article was prepared by Hicksons Lawyers.