The Employment Relations (Employee Remuneration Disclosure) Amendment Bill was introduced to Parliament on 20 March 2024 and passed its second reading last week. The Bill seeks to amend the Employment Relations Act 2000 to protect employees who discuss or disclose their remuneration from “detrimental repercussions to their employment”.
Current Law
Currently, employers are permitted to include pay secrecy provisions in employment agreements. This means that a failure to keep remuneration details confidential can result in disciplinary action being taken against an employee.
However, there seems to be a global trend towards prohibiting pay secrecy provisions. The United Kingdom recently made it unlawful for employers to include clauses in employment agreements that prevent employees from discussing their pay. In the United States, eight states have enacted pay transparency legislation, and nine others have introduced legislation that require employers to disclose salary ranges for job advertisements.
Proposed Changes
If enacted, the Bill would make it unlawful for employers to include clauses in employment agreements preventing employees from discussing or disclosing their remuneration with others.
The Bill would also enable employees to bring a personal grievance against their employer if they are subjected to adverse conduct for inquiring about, discussing, or disclosing their remuneration. Adverse conduct would include:
- dismissing the employee;
- offering unequal terms of employment, working conditions, benefits, or opportunities for training, promotion, or transfer compared to other employees with similar qualifications and experience; or
- subjecting the employee to detriment not faced by other employees in similar roles; or
- retiring the employee.
Impact
New Zealand currently has no comprehensive legislative pay transparency or pay equity requirements, which is highlighted by our 8.2% gender pay gap. It is anticipated that the Bill would create greater transparency in pay and enable any pay discrimination to be more easily identified and remedied.
However, in our experience very few employment agreement in New Zealand have pay secrecy clauses. In addition, there are often many reasons that employees do not wish to discuss their pay with others, and those types of discussions can be a little fraught from a culture perspective. For instance, employees may often feel embarrassed or uncomfortable to talk about their pay with others, and this can be the case when their pay is higher or lower than their colleagues.
There are very good policy reasons to support employees who have historically been underpaid, including through greater transparency. This particular approach however would appear unlikely to provide much support on that front without legislative pay transparency or pay equity provisions that actually have some teeth.
