Australia Takes Steps to Address Pay Secrecy and Gender Pay Gap

According to the Workplace Gender Equality Agency (WGEA), an Australian Government statutory agency created by the Workplace Gender Equality Act 2012, the gender pay gap in Australia is 22.8%, with women on average earning $26,596 less than men. The Australian Government is seeking to address this issue and, as a result, has made some significant changes to Australia’s employment laws. The Fair Work Legislation Amendment (Secure Jobs, Better Pay)(Cth) reform package (the “Amendment”) seeks to promote equality objectives for employees by banning Australian employers from creating policies or entering into employment contracts or agreements that mandate pay secrecy, among other directives.

Effective December 7, 2022, employees now have the right to elect whether to share information about their compensation or terms or conditions of employment that may be used to determine their compensation, such as hours of work. The Amendment imposes these rights not only during the employment relationship but also after the employment ends.

The ban on pay secrecy applies to employees who enter into new employment contracts after December 7, 2022, and to existing employment contracts where the contract does not specifically include pay secrecy terms. If an employee’s existing contract contains a pay secrecy clause, the clause will continue to operate until the contract is changed. Either way, employers cannot escape the effects of the changing law for long. Effective June 7, 2023, all pay secrecy clauses will be null and void in employment agreements entered on or after December 7, 2022.

The Amendment further includes an anti-retaliation provision, prohibiting employers from taking any adverse action against an existing or future employee who exercises these rights. Similarly, an employer cannot prevent an existing or future employee from exercising their rights under the new law. The Fair Work Ombudsman has the power to enforce these provisions through an enforceable undertaking, or by issuing an Order. Notably, individuals can also be liable for breaches of these new laws where they were “involved” in the contravention.

As a result of the changes, it is recommended that employers with operations in Australia review their existing template employment agreements, specifically any clauses that either explicitly or indirectly ban employees from discussing their compensation as well as general confidentiality clauses, which may also require amendment to comply with the new laws.  This same guidance also applies to offer letters, incentive plans, special award letters and/or bonus schemes. It remains an open question whether the Amendment will be interpreted to prohibit a future employer from asking a prospective employee about their current wages, as the Amendment confers the right to discuss or not discuss pay, even after the employment ends.

Employers should also consider the wider implications of the changes around pay equity and transparency of pay and benefits, which may require further policy changes and training for managers. Of note, on February 8, 2023, the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 was introduced into Parliament. The Bill seeks to impose further requirements on employers with over 100 employees to report their gender pay gap to the WGEA.

Now, more than ever, Australian employers should take steps to review their compensation practices to further ensure that employee compensation is based on legitimate business factors and that the company policies and practices are equitable and in line with these new requirements now in place and on the horizon.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.