Overview

Last year’s IR reforms included changes to the Fair Work Act 2009 (Cth) (Act) that give employees rights to disclose their remuneration to others and to ask other employees about their remuneration. The reforms are intended to help close the gender pay gap by allowing employees to openly discuss their remuneration and push for pay rises where necessary. There are actions that employers need to take to ensure they comply with the new laws and do not expose themselves to civil penalties.   

The new pay disclosure rights

The new pay disclosure rights give employees a right to disclose, or not disclose, any of the following information to any other person:

• their remuneration;

• any terms and conditions of their employment that are reasonably necessary to determine remuneration outcomes (such as the number of hours that they work).

An employee also has a right to ask any other employee (whether employed by the same employer or a different employer) about any of the following information:

• the other employee’s remuneration;

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

Employees are not compelled to provide this information if they do not want to.

It is unlawful for employers to take adverse action against a prospective employee, current employee or ex-employee because they exercise or do not exercise any of these rights.   

Pay secrecy terms in contracts of employment entered into after 7 December 2022  

If a contract of employment entered into after 7 December 2022 has a term that is inconsistent with the pay disclosure rights, that term will have no effect to the extent that the term would be inconsistent with those rights.

Pay secrecy terms in contracts of employment entered into before 7 December 2022

If a contract of employment entered into before 7 December 2022 has pay secrecy terms, those terms will remain in force until the contract of employment is varied. At that point any terms that are inconsistent with the pay disclosure rights will have no effect to the extent of the inconsistency.

Prior to the contract of employment being varied, the employer will be able to enforce the pay secrecy terms and it will not be considered unlawful adverse action for them to do so. After the contract is varied the employer will no longer be able to enforce pay secrecy terms and it may be considered unlawful adverse action if they seek to do so.

There is no obligation on employers to vary contracts of employment entered into before 7 December 2022 that contain pay secrecy provisions. However, most contracts of employment undergo natural variations at some point which would cause the pay secrecy provision to cease to apply. This could include where an employee receives an increase in salary or where they are promoted to a new role.

Pay secrecy terms in modern awards or enterprise agreements

Pay secrecy terms in a modern award or enterprise agreement made before, on or after 7 December 2022 have no effect from 7 December 2022.

Civil penalties for employers

Civil penalties apply where an employer enters into a new contract of employment or other written agreement with an employee that includes a term that is inconsistent with the pay disclosure rights. This could include when an existing contract of employment is varied in writing, because the variation agreement will be a form of written agreement.

The maximum penalty for serious contraventions is $165,000 for an individual and $825,000 for a corporation. Otherwise, the maximum penalty is $16,500 for an individual and $82,500 for a corporation. 

The civil penalty provisions will come into effect on 7 June 2023.

This means employers need to ensure that:

• they do not enter into a new contract of employment that includes a term that is inconsistent with the pay disclosure rights;

• when they vary an existing contract of employment that contract does not contain a term that is inconsistent with the pay disclosure rights.

Where to from here?

We suggest that employers take the following steps:

• Review their employment contract templates now to ensure they do not contain any terms that are inconsistent with the pay disclosure rights.

• To be safe, consider including a provision in their employment contract templates that gives employees an express right to engage in pay disclosure (just let us know if you would like some wording for this).

• Use the revised contact templates whenever a new employment contract is entered into from now on.

• When any variation is made to a contract of employment, such as when someone receives a pay rise or their position changes, ensure that the person’s contract does not contain any terms that are inconsistent with the pay disclosure rights.  

• Review their workplace policies to ensure they do not contain terms that are inconsistent with the pay disclosure rights.

• Ensure that no one in their organisation seeks to prevent prospective employees, current employees or ex-employees from exercising their pay disclosure rights (unless the person has an unvaried contract with pay secrecy provisions that was entered into before 7 December 2022).

For more information or help reviewing your contracts of employment, please contact Sean Melbourne.