“Secure Jobs Better Pay” amendments – Pay secrecy and cap on fixed term contracts

As part of the Federal Government’s implementation of recommendations from the Respect@Work report, the Fair Work Legislation Amendment (Secure Jobs Better Pay) Act (Act) has now passed and received Royal Assent on 7 December 2022.

In this update, we look at two critical aspects of the Act regarding pay secrecy clauses, and a cap on fixed term employment contracts and what we are recommending employers do now to respond. Stay tuned for more information about other important aspects of the Act in coming weeks.

You can also click here for details on the new prohibitions of sexual harassment in the workplace under the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act, which received the Royal Assent on 12 December.

Pay secrecy clauses prohibited

Overview

For any employment contract entered into, or varied, after 7 December 2022, the Fair Work Act now enshrines the right of employees to disclose, or not disclose, their pay. From that date, any such clause is of no effect and cannot be enforced. Such clauses are effective in contracts in place at that date, but only until they are varied, or a new contract is entered into.

Additionally, employees will be protected from employers taking adverse action for disclosing (or not disclosing) their pay.

Importantly, following a 6 month “grace period” after 7 June 2023, it will be a contravention of the Fair Work Act to include a pay secrecy clause in an employment contract. Breaches of the Fair Work Act may attract penalties of up to $66,600 for each contravention for a corporation.

Immediate actions for employers

• Review your template employment contracts to remove any “pay secrecy” clauses.
• Ensure that variation documentation confirms the variation to remove any pay secrecy clause.

Limiting the use of fixed term employment contracts

Overview

Fixed term (or maximum term) contracts can be used where parties know there will be a certain end date to the employment, and they offer certainty to employers and employees. For employers, they can protect against claims for redundancy pay, unfair dismissal and notice of termination when the period expires.

With some limited exceptions, the Act now limits the use of fixed term contracts for the same role to the shorter of two years, or two consecutive contracts. Where this obligation is breached, the employment contract will still be effective except that that end date for the contract will be invalid and the employee will be deemed a permanent employee.

Exceptions to this rule will apply where an employee is performing a discrete task for a fixed period; undertaking essential work during peak demand periods, and temporary replacement positions (such as worker’s compensation or parental leave). Additionally, apprentices and trainees are not covered by this cap on fixed term contracts.

Employers who engage an employee on a fixed term contract must now provide employees with the “Fixed Term Contract Information Statement”, developed by the Fair Work Ombudsman. Failure to provide this statement is a breach of the Fair Work Act and may attract penalties.

Immediate action for employers

• Review your workforce and identify which employees are or have been engaged on fixed term employment contracts for more than 2 years, and consider whether their role will be extended, or if they will be undertaking a new role.
• Ensure that all new fixed term employment contracts are accompanied by the Information Statement.