Secure Jobs, Better Pay – Pay secrecy and employment advertisements

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 received royal assent on 6 December 2022. In this bulletin, we explore two provisions that have immediate effect from 7 December 2022: the prohibition of “pay secrecy clauses” and job advertisements that include unlawful rates of pay.

Pay secrecy

The intent behind these particular amendments is to move towards closing the gender pay gap and eliminate discrimination in the workforce, by requiring greater transparency and accountability.

There are three elements to these new pay secrecy laws:

1. Right to disclose or not to disclose pay

Employees now have a right to disclose, or not to disclose:

(a) their remuneration; and

(b) any terms and conditions of employment that are reasonably necessary to determine remuneration outcomes. 

Further, employees are also given the right to ask another employee for this information. However, employees cannot be compelled to disclose this information.  

Notably, these rights are now workplace rights within the meaning of s.341 of the FW Act, giving protection to employees against adverse action for exercising a workplace right.

2. Pay secrecy terms have no effect

All “pay secrecy clauses” within employment contracts or industrial instruments have no effect. This means an employer cannot rely on terms that require an employee to keep their remuneration, or terms and conditions that are reasonably necessary to determine remuneration outcomes, confidential. 

3. Pay secrecy terms prohibited

Employers will contravene the FW Act, and face civil penalties, if an employment contract or other written agreement is entered into that contains terms that are inconsistent with an employee’s rights to disclose or not to disclose their remuneration. There is a 6-month grace period for this provision.

What this means for employers

• There are some important transitional arrangements in place, meaning the above provisions apply depending on the circumstances.

• If an employment contract was entered into before 7 December 2022 and it already contains a pay secrecy clause, these amendments have no immediate effect.

• However, if the existing contract is varied, it cannot contain a pay secrecy clause. A variation could include a pay increase or change in role.

• All contracts or other written agreements entered into from 7 December 2022 must not contain pay secrecy clauses.

• What is remuneration is broad and not defined in the FW Act. The ordinary meaning of “remunerate” is the reward for services rendered. Remuneration would cover wages or salary, penalty rates, shift premiums, allowances and bonuses, commissions and incentives.

• Employers need to carefully consider offering special payments and remuneration to individual employees, or prospective employees. The flow on effect of such arrangements is that other employees may make demands for similar pay. This aspect of the legislation may ultimately be counterproductive to ‘better pay’.

• Employers may need to consider implementing bonus and incentive schemes by way of policy (and not contract or other written agreement) with a view to keeping those arrangements confidential from competitors. It is not clear if the legislation extends this broadly to cover arrangements in this way.

• Employers are encouraged to carefully consider their remuneration policies and practices to ensure consistency and minimise risk from special deals that can no longer be secret.

• Pay secrecy provisions will not apply to settlement documents, like deeds of releases. The provisions only apply to employment contracts or other written agreements and industrial instruments.

Employment advertisements

In addition, a new civil remedy provision has been added to the FW Act to prohibit employers from advertising jobs with pay rates that do not comply with the FW Act or an industrial instrument. The purpose of these provisions is to:

• encourage employers to consider their workplace obligations before advertising jobs;

• promote a culture that prioritises awareness and compliance with the FW Act; and

• reduce worker exploitation and unintentional underpayments of employees.

1. Employment advertisements must not contain a rate of pay that contravenes the FW Act or an instrument

If an employer seeks to include a rate of pay in a job advertisement, the rate of pay cannot be below the minimum wage or the minimum rate of pay under an applicable instrument.

2. Advertisement of piecework must include periodic rate of pay if the employee is entitled to it

If the job relates to piecework (e.g. fruit picking) and the worker would also be entitled to a periodic rate of pay (i.e. time-based rate of pay such as hourly or weekly pay), employers must specify the rate of pay or include a statement to the effect that a periodic rate of pay is payable in relation to the employment. 

What this means for employers

All job advertisements after 7 January 2023, irrespective of whether the employment was advertised before or after this day, must comply with the new provisions. A breach of this section may result in a compliance notice by an inspector or incur a civil penalty.

Employers should:

• review all live job advertisements to ensure the rate of pay advertised meets the national minimum wage or the applicable rate under an applicable instrument, noting that any necessary amendments must be made before 7 January 2023;

• also review all live job advertisements that relate to piecework and ensure the advertisement specifies the periodic rate of pay that applies or include a statement that the employee would be entitled to a periodic rate of pay; and

• seek legal advice to undertake an award coverage and classification review of its business operations and employee population to ensure the correct rate of pay is being advertised. This is particularly recommended if employers are unsure of the applicable instrument that applies to their business and employees or if rates of pay have not been regularly increased.

Authors: Jessica Park, Hannah Lawson and James Mattson