5 December, 2022

Legislative amendments – Pay secrecy and sexual harassment

Blog | Industry News

Comprehensive Fair Work Act 2009 (Cth) changes have been passed by Parliament in the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022. For a general summary of all changes and links to more detailed notes on each topic, please see our summary ,EMA Note.

This EMA Note focuses on the legislative changes related to gender equality as passed by Parliament. The most notable changes in relation to gender equality are the prohibition on ‘pay secrecy clauses’ – which are common in employment contracts – and the introduction of stronger provisions against sexual harassment in employment.

One of the key election promises by the Labour Party in the most recent federal election was to address the persisting gender pay gap. This includes by looking at ‘pay secrecy clauses’ which forbid employees discussing with each other their terms and conditions of employment, such as remuneration. This is intended to be one step (of several) towards minimising the gender pay gap.

What will change and when?

This note is not a comprehensive explanation of the changes and should not be relied on as advice. In summary:

• ‘Pay secrecy clauses’ will be forbidden in new contracts and will have no effect in existing contracts. The effects of this are described in further detail below.
• The Fair Work Act will include provisions prohibiting sexual harassment in coection with work. The effects of this are described in further detail below.
• The Fair Work Commission will have broader powers in making equal remuneration orders, and can do so at its own initiative rather than on application. This seems unlikely to have much practical effect on employers in the short to medium term, especially considering the Commission has recently stated that it would be reluctant to look into further wage value amendments to modern awards given the sheer volume of evidence needed to come to an informed decision.[1]
• New Fair Work Commission expert panels will be constituted, including in relation to pay equity. This will similarly have no practical effect on employers in the short to medium term, but may have effects in the long term should these expert panels determine that equal remuneration orders in certain industries would be justified. If any such recommendations or orders are made, we will publish EMA Notes to describe and explain the effects (if any) they will have on employers.
• The Fair Work Commission (and its and president) will have various new powers and functions, including in relation to research and issuing orders, to address gender inequality. This similarly will have minimum practical impact in the short term, but if the Commission undertakes research and publishes reports, these reports may be informative to employers (especially if they include recommendations). We recommend employers keep their eyes open for any relevant reports published by the Commission that address gender inequality to see if there are any key learnings that come out of those reports.

For the two amendments that have the most practical effects on employer, the pay secrecy amendments will commence on the day after the Bill receives royal assent; and the sexual harassment amendments will commence three months after the Bill receives royal assent.

What should employers do now?

Pay Secrecy Clauses

One of the more significant changes in the Bill is the introduction of an express workplace right for employees to ask each other about and disclose (or not, at their own choice) information about their remuneration and any terms and conditions of employment related to their remuneration (such as their hours of work). Adverse action taken against an employee for this will be a breach of the general protections.

It is common for employment contracts to include provisions about sensitive or confidential information which encompass the terms of the contract itself, including remuneration, and forbid employees from disclosing that information. These clauses as they appear in existing contracts will be of no effect. After commencement of the Bill, if an employer enters into a contract of employment (or other written agreement) with an employee with a pay secrecy clause, the employer will have contravened the Fair Work Act and may be liable for pecuniary penalties.

Employers must, from now, ensure that their template contracts do not include pay secrecy clauses. If employers have recently made offers to employees which have not yet been accepted, we recommend those employers prioritise communicating with the employees that upcoming amendments necessitate removing those clauses from the offered contract and issuing a new contract without any such clauses. This avoids the risk that the employee will agree to the contract after the commencement date which could expose the employer to penalties.

EMA Consulting is available to assist in drafting or redrafting contracts if needed. We will be reviewing and updating our template contract of employment suite that are available for purchase (and for download for subscribers of My ERLibrary) to ensure our template contracts are compliant with the new amendments.

Sexual Harassment

The Bill amends the Fair Work Act to include considerable new provisions regarding sexual harassment. The main (summarised) practical effect of these amendments is that employees will have another avenue to pursue claims regarding sexual harassment in the workplace, being able to make a claim for the Fair Work Commission to deal with a dispute about sexual harassment. It will also be a civil remedy provision. Employers are vicariously liable for the actions of their employees or agents unless they can prove that they took all reasonable steps to prevent the harassment.

Interestingly, the amendments remove from the Fair Work Act the definition of ‘sexually harassed at work’ and appear not to introduce any new definition of sexual harassment (or similar). The practical effect of this is that it will be for individual Commissioners to determine, in a dispute, whether particular conduct is ‘sexual harassment’ or not without a strict legislative definition. Until a court makes an authoritative decision (or the Full Bench creates precedent) for a definition, it is likely that the Commission will be guided by the definition in other legislation (such as the Sex Discrimination Act 1984 (Cth)).

However, as described in our previous EMA Note, these changes do not vary an employer’s obligations to eliminate sexual harassment and discrimination from the workplace. Employers should already be taking all reasonably practical positive steps to eliminate (or minimise) sexual harassment in the workplace. Recently, the Australian Human Rights Commission created a website for individuals and organisations to help in meeting this requirement. EMA Consulting can offer various services to assist employers in meeting their legislative obligations (including by way of training, investigations, and assistance in drafting and implementing policies and procedures).

Require further information/assistance?

This EMA Note is not comprehensive advice about your situation and does not cover all your obligations. If you require further information or advice, please contact your Consultant.

[1] Justice Ross, ‘President’s Statement: Occupational Segregation and Gender Undervaluation’, Fair Work Commission, 4 November 2022.

EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMA Consulting on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.