From 7 December 2022 pay secrecy terms in workplace instruments, including employment contracts, cannot be enforced. Employees now have a workplace right to discuss their pay and employment conditions with other employees.

This change forms part of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 reform package. The ban is primarily aimed at reducing gender-based pay differences but will also benefit other disadvantaged workers and create higher levels of pay transparency.

Research shows that pay transparency and pay secrecy laws have reduced gender pay gaps by up to 40% in Canada! The inadvertent benefit of pay secrecy laws is that employees don’t even need to discuss their employment conditions to encourage organisations to ensure equitable pay, the idea of potentially having to justify their decisions should improve equity.

What are pay secrecy terms?

Pay secrecy terms are terms in employment contracts, award or agreements which prohibit employees from discussing their pay or employment terms with each other. Employers use these terms to prevent employees from discussing their employment conditions and enforce treating this information as confidential.

What exactly are employee’s workplace rights around pay secrecy?

Under the new laws, employees have a right to discuss their pay, and their employment terms and conditions that would be needed to work out their pay (e.g., their hours of work) with other employees. Employees can ask other employees about this; however, employees don’t need to share their details if they don’t want to. This includes discussion with future employees or ex-employees.

When do the pay secrecy laws start to apply?

7 December 2022 for employment contracts that were entered into on or after this date:

• Employment contracts that were entered into on or after 7 December 2022 which don’t include any pay secrecy terms; as well as
• Employment contracts that were entered into after 7 December 2022 which do include pay secrecy terms - the pay secrecy terms will simply have no effect and cannot be enforced.

For employment contracts that were entered into before 7 December 2022 which do include pay secrecy terms, the requirement will apply when the employment contract is next updated.

What does this all mean for employers?

In summary, employers can no longer prevent an employee from discussing their pay or employment conditions with other employees or, take adverse action against employees for doing so.

‘Preventing’ employees includes putting pay secrecy terms in employment contracts and other agreements. Pay secrecy terms need to be removed from employment contracts from now on. Perks People Solutions suggest reviewing your employment contract templates and ensuring that any terms around pay secrecy are removed, and to check that the definition of “confidential information” in employment contracts does not reference remuneration details.

If you have already sent out employment contracts since 7 December 2022 which included pay secrecy terms, the terms will have no effect and cannot be enforced.

However, from 7 June 2023, pay secrecy terms cannot be included in employment contracts at all and employers who do could face penalties.

It is important to review your processes now as to not be caught out post 7 June!