Important changes to employment law have been adopted in relation to employee payment details, and what information can (or can’t) be declared publicly.  Our legal expert Paul Cott, from Law on Lydiard Lawyers, explains.

Some important changes relating to employment law occurred in late 2022.

In summary, these changes are: employees now have the right to share (or, in fact, not share) information about their pay; there are now bans on clauses in employment contracts that mandate pay secrecy; and with regard to job advertising, there is a prohibition on job ads which advertise a rate of pay lower than the minimum rate of pay which the law prescribes.

The first two changes are significant, and the third one arguably reflects what the law already says in terms of misleading and deceptive conduct, or is set out in the NES (National Employment Standards) and similar.

PAY SECRECY

In terms of the first two changes, employees now can ask other employees what their terms and conditions of employment are, and discuss the subject openly if they wish to. They certainly do not have to do so, and interestingly, the changes apply even after the employee has left the employment.

There are, as is so often the case with new laws, what are called transitional arrangements in so far as when the laws take effect. This gives employers time to get their employment contracts and policies and procedures in order. These new pay secrecy laws apply to employees who have written employment contracts they enter into after 7 December 2022, or where they enter into the contract before 7 December 2022, where that contract does not contain a clause that would fall foul of the new laws. That is, the new laws outlaw the adding into an employment contract, from that date, a clause outlawed by the new laws.

With regard to employment contracts entered into before 7 December 2022, which do in fact contain a prohibited clause, the clause will now have no effect and so cannot be enforced legally.

So, employees can now choose (or not choose) to discuss not only their actual rate of pay, but also penalty rates, shift allowances, bonuses, profit shares, commissions, and incentive payments.

These new laws are apparently a step towards greater transparency as regards pay at work, as well as a step towards closing the (what has always seemed to this author as being indefensible) gender pay gap.

It is of the utmost importance that employers be aware that a breach of the new laws can result in the imposition of civil penalties on an employer as a breach of the Fair Work Act. There is a transitional or grace period of six months after the introduction of the laws, whereby some leeway is given to employers to breach the Act and not fall foul of the civil penalty provisions.

Employers should also consider reviewing all of their remuneration and employment agreements and ensure that any secret deals with particular employees are looked at, as to keep them secret is now outlawed.

If an employee were to lodge an unfair dismissal or similar type of claim and that matter is settled, it is important to note that these new pay secrecy laws do not apply to the settlement documents that record such settlement payments (though note that the terms of such settlements are confidential).

What will actually be the result ‘at the coalface’ of these new laws remains to be seen. One can’t really imagine water cooler conversations where the sole or main topic of conversation is who gets paid what; however, human nature being what it is, it could well happen in some workplaces. Let’s hope that such conversations don’t lead to too much (or indeed any) internal friction amongst employees and no instances of bullying as a result. One could see that as a result of such a conversation, where one employee finds out that another employee is getting a bonus, which the first employee is not getting, or a higher rate of pay where allegedly the two jobs are the same, pressure may be brought to bear on the employer to offer the same deal to the other employee. Employers will have to navigate these things, but over time it is likely that such conversations will become easier. In the meantime, the changes could become problematic.

JOB ADVERTISEMENTS

From 7 January 2023, employers cannot post in job advertisements references to rates of pay that are below the minimum required by law, such as by the terms of a Modern Award, an employment contract, or the NES. They save employees being recruited into jobs that offer pay that is below the minimum legally required, and then, when they are recruited, in actual fact as well, being paid below the minimum. This aspect of the new laws is arguably put into place in light of the media hype for some time now surrounding employee underpayments.

It is critical that employers note that even if the job advertisement was posted in 2022, these new laws, even though they came into effect in January 2023, will apply to the job ad if it advertises a rate of pay below the required minimum.

As with the changes to the law regarding pay secrecy, to fall foul of these laws can result in a civil penalty (meaning any penalty imposed such as a monetary fine is not indicative of a criminal offence per se) being imposed on the employer. Ahead of that, however, the employer instead may receive a visit from an inspector from the Fair Work Ombudsman, and a compliance notice may be issued.

It is important to note that whilst these laws are in place now to address employee underpayments, it is this author’s view that the majority of underpayments (at least in the small business sector) are inadvertent rather than deliberate. Note, though, that to dishonestly underpay employees in Victoria is now a criminal offence, since the changes passed to the law in 2022. We have one of the most complex award/industrial relations systems in Australia, and employers can have real difficulty in working out not only if their employees are covered by an award, but which award (and there can often be potentially overlapping awards) and then they have to then go through the award to determine which rate pay applies, which classification the employee falls under, and which allowances and penalties apply in a given case too. If rates of pay for an employee or groups of employees have not increased for some time, or regularly at all, this may be a red flag that there may be a potential underpayment issue. If there is a potential issue with an underpayment or underpayments, and a new employee or employees are being sought, this could feed into an employer falling foul of these new job advertisement laws.

As always, any queries as to these changes should be made to a professional, and it can be assumed that most professionals themselves will now be fully abreast of these changes. The employment law landscape is an often-changing one, with 2022 and 2023 bringing in some of the most significant changes seen for some time.