Until 7 December 2022, employers in Australia could legally direct employees not to disclose their salary with their co-workers. Many employment contracts used to include a ‘pay secrecy’ clause prohibiting employees from discussing their salary packages. However, due to laws passed in 2022, clauses of this type are no longer permitted in employment contracts. This article outlines the changes to the laws surrounding wage confidentiality.
What was a Wage Confidentiality clause?
A pay-secrecy clause in an employment contract directed an employee not to discuss their pay with co-workers. This clause used to act much like a confidentiality clause, keeping a worker’s pay a secret between employer and employee. Wage confidentiality clauses were particularly common in industries that offered discretionary incentives and bonuses to employees.
Changes to the law on wage confidentiality
In 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 came into effect. One of the changes this amendment made was prohibiting employers from including wage confidentiality clauses in employment contracts. The government abolished wage confidentiality clauses in the hope this measure would help to address the gender pay gap.
The changes introduced two additional workplace rights into the Fair Work Act 2009. These are:
- that a person can ask another person what their pay is; and
- a person has a right not to disclose their pay if asked.
Contracts entered into before 7 December 2022
A person who is still employed under a contract that they entered into prior to 7 December 2022 and that contains a wage confidentiality clause, continues to be bound by that clause until the contract is varied. An example of when a contract is varied is where the employee is promoted.
An employee in this situation does not have recourse to the workplace rights relating to disclosure of pay as they are inconsistent with the terms of their employment contract. However, when a contract that includes a pay secrecy clause is varied, the employee then has recourse to the workplace rights relating to disclosure of pay.
Contracts entered into after 7 June 2023
When the changes were introduced, a six-month grace period was legislated from the 7 December 2022 to the 7 June 2023. This period has now elapsed. If a person enters an employment contract after the 7 June 2023, that contract must not include a wage confidentiality clause. If an employment contract that includes a wage confidentiality clause is signed after 7 June 2023, that clause is not valid and cannot be enforced.
An employer that enters into a contract that includes a wage confidentiality clause after 7 June 2023 could face civil penalties as such a clause is now a breach of workplace rights.
An employee who is prevented from disclosing their pay can now make a ‘general protections’ claim to the Fair Work Commission. They can also complain to the Fair Work Ombudsman.
General Protections claims
General Protections claims can be made in a range of situations involving an employee being subjected to adverse action for a prohibited reason – the most common example being unfair dismissal.
There are two types of general protections claims:
The possible outcomes of a general protections claim include:
- an apology
- reinstatement (if the employee was dismissed)
- a financial settlement
Complaints to Fair Work Ombudsman
A complaint can also be made to the Fair Work Ombudsman (FWO) about a breach of a workplace right. The Fair Work Ombudsman does not investigate every complaint it receives. When the FWO becomes aware of potential non-compliance with the Fair Work Act 2009, it may choose to investigate if the matter is very serious or if it is in the public interest.
If the FWO finds that the Act has been breached it may inform the employer of the failure and require it to take specific action. It may also issue an Infringement Notice, requiring the employer to pay a penalty. The maximum penalty that can be imposed for a breach of the Act is $1878 for an individual or $9390 for a body corporate. An Infringement Notice can be issued up to 12 months after the breach occurred.
The FWO may also commence litigation against the party that is in breach if it consider that this is appropriate.
If you require legal advice or representation in any legal matter, please contact Armstrong Legal.