Pay secrecy laws prevent employer from protecting ‘commercially sensitive’ client list

6 July 2023
Erin Lynch, Partner, Sydney Diana Diaz, Special Counsel, Melbourne

This article is a follow up to the article that Gadens’ Workplace Advisory and Disputes team published in relation to changes to the Fair Work Act 2009 (Cth) (Fair Work Act) as part of the Federal Government’s Secure Jobs, Better Pay reforms. The previous article can be found here.

The Fair Work Commission has now handed down a decision discussing the effect of pay secrecy provisions on the terms of proposed enterprise agreements. This decision is an example of the wider practical reach of the new provisions beyond employment contracts.

Below we discuss the new provisions, the Commission’s decision as well as what this all means for employers.

The new pay secrecy laws – a snapshot

As you may recall, key changes to the Fair Work Act have been rolled out in stages since 7 December 2022 in accordance with the Federal Government’s Secure Jobs, Better Pay amendments.

Under the new provisions, employees were granted new workplace rights to:

  • disclose details about their remuneration, and the terms and conditions of their employment that are reasonably necessary to determine remuneration outcomes (such as hours of work); and
  • ask any other employee about the other employee’s remuneration, and any terms and conditions of the other employee’s employment that are reasonably necessary to determine remuneration outcomes.

The new workplace rights apply to national system employees from 7 December 2022 unless an employee was subject to a pay secrecy term in their contract of employment before that date, and that contract has not been varied after 7 December 2022.

From 7 December 2022, any pay secrecy terms inconsistent with the new workplace rights which are contained in employment contracts or fair work instruments (such as modern awards, enterprise agreements, workplace determination and Fair Work Commission orders), will have no effect.

Importantly, as of 7 June 2023, penalties now apply to employers that enter into contracts of employment or other written agreements with an employee which contain pay secrecy terms.

Penalties for entering into new agreements containing pay secrecy terms are up to $93,900 for companies and $18,780 for individuals, or up to $939,000 for companies and $187,800 for individuals in the case of serious contraventions.

What was the Fair Work Commission’s decision about?

Equans Electrical and Communications Pty Ltd (Equans) made an application to the Fair Work Commission for the approval of an enterprise agreement.

The proposed enterprise agreement contained a list of clients which was to be used to determine between different overtime amounts payable to employees. Equans applied to the Commission for an order to redact the client list, asserting that the list was commercially sensitive and that it did not wish to disclose the names of its clients publicly.

In a single member decision, Deputy President Dobson noted that:

“…the applicant made the decision itself, to include this list in its Enterprise Agreement in order to distinguish the differing amounts of overtime payable to employees working at these client sites as opposed to others. It is my view that the Applicant could have found another way to express such a condition if the names were indeed so commercially sensitive that it would harm the viability of the Applicant’s business. Further, I note that the Applicant has distributed the unredacted Agreement to all of the Employees covered by it and it will be required to do the same for all future employees.”

Because the client list was essential to determining which overtime penalty rate applied to work performed, Deputy President Dobson noted that granting the order would mean that if an employee sought to have their entitlements checked by a third party, the third party would be unable to access the full terms and conditions of employment essential to determine whether the appropriate penalty rates were paid. In addition, Deputy President Dobson noted that to require employees not to disclose this information would be a breach of the new workplace rights granted in the Fair Work Act.

The enterprise agreement was ultimately approved but without the confidentiality order in place.

What does this mean for employers?

Employers need to ensure that terms and conditions of employment which are necessary to determine remuneration outcomes are drafted carefully and do not include commercially sensitive information such as client lists. This will not prevent pay secrecy provisions from applying, but it may prevent other commercially sensitive information from being disclosable by employees.

This decision is also a timely reminder that provisions relating to pay secrecy have wide application beyond employment contracts. The prohibition on employers entering into pay secrecy provisions applies to contracts of employment and ‘other written agreements’ with employees, while the provision which states that new pay secrecy terms entered into on or after 7 December 2022 are of no effect applies to contracts of employment and fair work instruments such as modern awards, enterprise agreements, workplace determination and Fair Work Commission orders.

Gadens is able to assist you with reviewing your employment contracts and other written agreements to ensure that your organisation does not breach the new pay secrecy provisions.

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Authored by:

Erin Lynch, Partner
Diana Diaz, Special Counsel
Jessica Smith, Lawyer

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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