Pay Secrecy provisions

Historically many employers have used pay secrecy clauses in employment contracts to stop co-workers comparing salary and other financial benefits, sometimes with the effect of limiting pressure for pay increases. These clauses typically provide that matters concerning remuneration are confidential to the parties and prohibit disclosure of these details to third parties.

However, the landscape in this area is set to change with the Amending Act giving employees a workplace right to disclose (or not disclose) information about their own remuneration and any related terms and conditions of their employment to any other person. The Amending Act also creates a corresponding right for workers to ask other employees (whether or not they work for the same employer) about their remuneration and other related terms and conditions of their employment. As statutory workplace rights, these new provisions come within the general protections provisions of the Act, so that adverse action on the basis of these rights is prohibited.

To give further effect to these new laws, the Amending Act has also introduced changes to the Fair Work Act to make a term of a fair work instrument (such as an award or enterprise agreement) or a term of any contract of employment ineffective to the extent that it expressly purports to require pay secrecy, contrary to these new protections.

In addition, for all new contracts entered into after the commencement of these new laws, employers are exposed to the risk of financial penalties where a contract includes a pay secrecy provision.

Whether we will see greater salary transparency resulting in higher wages across the board and increased progress in closing the gender pay gap as a result of these new laws remains to be seen.

What we do know in the short term is that employers who still rely on pay secrecy obligations will need to cease the practice of doing so – including by removing such provisions from new offers of employment – in order to avoid breaches of the Fair Work Act moving forward.

We recommend that all employers review their existing employment contract templates to ensure compliance with these new provisions as there are significant consequences for contraventions including civil penalties.

Limitations on Fixed Term Contracts

The Amending Act brings about changes to the Fair Work Act foreshadowed during the last federal election campaign to limit the operation of fixed term employment contracts – a measure designed to increase and improve job security.

Specifically, this new law prohibits an employer from entering into a fixed term contract with an employee for a period longer than two years.

The provision also prohibits an employer from entering a fixed term contract with an employee:

• that can be extended or renewed for a period that, in total across all contracts, exceeds two years
• that can be extended or renewed more than once, or
• in the case of consecutive fixed term contracts, where the combined total duration of the previous and new contracts would exceed two years.

There are certain limited exceptions to the prohibition, including:

• where the employer needs additional workers to do essential work during a peak period
• the employer needs additional staff members during an emergency
• the employee earns over the high income threshold for the first year of the contract
• the work to be performed is reliant on government funding (but only where the funding is payable for a period of more than two years, and there are no reasonable prospects that the funding will be renewed), or
• the fixed term contract is permitted by a modern award.

Further where an employer enters a fixed term contract which contravenes these new provisions, that term will be invalid, and the employment will in effect be converted into an indefinite contract of employment.

Importantly, the legislation as passed by Parliament makes it clear that these fixed term contract provisions will only commence operation after 12 months from the date the Amending Act was given Royal Assent on 6 December 2022. Workplace Relations Minister Tony Burke has confirmed this will be the case - that employers will have 12 months to comply with these fixed term contract amendments from 6 December 2022.

The limitations on fixed term contracts are likely to raise particular issues for not-for-profit organisations and charitable institutions where fixed term employment is often tied to specific funding arrangements (typically for periods of 12, 24 or 36 months), and such organisations will need to start to consider how to address these issues going forward, in preparation for the commencement of these new laws in December 2023.

Equal Remuneration Provisions

Finally, in introducing these proposed legislative reforms to the Fair Work Act, Workplace Relations Minister Tony Bourke stated in October 2022 that gender equity “is at the very heart of our government’s agenda” making it “an overarching object of the Fair Work Act in modern award objective and in the minimum wages objective”.

This policy objective flows through in changes brought about by the Amending Act which require the Fair Work Commission (FWC) to specifically consider gender equality when performing functions or exercising its powers under the Fair Work Act, including when setting conditions of employment in modern awards and reviewing minimum wages. The changes will be supported by the establishment of a pay equity expert panel and a caring community sector expert panel within the FWC.

These amendments are likely to have an immediate impact, including on proceedings already under way – such as the work value case currently before the FWC seeking increases to wages and entitlements across the aged care sector.

Further information / assistance regarding the issues raised in this article is available from the author, Brian Jackson, Special Counsel, or your usual contact at Moray & Agnew.