Jodi Sharman, Partner and Bridget Perkins, Law Graduate at Hesketh Henry join Legalwise Insights to explore the current New Zealand legal position on pay secrecy clauses and whether any changes may be on the horizon, aligning New Zealand more closely with Australia and The United Kingdom.
“How much do you earn?” While once a taboo question, it is now much more common for people to discuss their salaries, not only amongst friends and family, but also with colleagues. Is this a good or bad thing, and what does the law say about it?
The Current Legal Position
Salary or wages information amounts to personal information under the Privacy Act 2020. It is an employee’s prerogative to do as they wish with the information, with one important caveat; their employment agreement might prevent them from disclosing it to third parties.
Confidentiality clauses are commonplace in employment agreements, and often impose restrictions around sharing salary or wages information. However, the future of these clauses is uncertain. In 2021, the Education and Workforce Committee set up an inquiry into pay transparency and recommended that the Government develop pay transparency measures. There is also a Private Members Bill on this topic (yet to be drawn), which would render these clauses unlawful, allowing employees to freely discuss and disclose their pay information without repercussions in their employment.
Overseas Jurisdictions
This proposed pay transparency approach would bring New Zealand in line with other jurisdictions. Australia, for example, passed a law in December 2022 which prohibits pay secrecy clauses in new employment agreements and renders existing clauses invalid. The United Kingdom has similar laws, which allow employees to discuss their pay for the purposes of finding out how their pay compares to their colleagues and whether any difference is attributable to discrimination.
Rationale and the Need for Reform
The rationale for reform in the pay transparency space in New Zealand is the same as that of Australia and the United Kingdom. Proponents argue that contractual terms which allow pay secrecy can lead to discriminatory outcomes, whereas pay transparency would allow pay discrimination to be more readily identified and addressed.
Research and reports on the issue certainly support the view that pay disparity between genders, ethnic groups and for people with disabilities is a longstanding and live issue. The Pacific Pay Gap Inquiry Report, for example, found that for every dollar a Pākehā man made in 2021, Pākehā women earned 89 cents, while Māori men earned 86 cents, and Māori women and Pasifika men earned 81 cents. The earnings for Pasifika women were reportedly the lowest, at 75 cents.
Future of Reform?
Progress on this issue was made in August 2023, when the previous Labour Government announced its intention to implement mandatory pay reporting systems which would at first require businesses with more than 250 employees to publicly report their gender pay gap, and later those with more than 100 employees.
However, the timing of any amendments to the existing law remains unclear. Legislation to address the issue of pay secrecy, apart from the Private Members Bill on the topic, is yet to be drafted. More critical to the fate of any such legislation is whether the new Government will take up the mantle to progress the issue. While no indication of its stance has been made to-date, it is worth watching this space.
Jodi has been practising employment law for more than 15 years, and has considerable experience in working with employees, employers and unions on a wide range of employment law matters and litigation issues. Jodi has appeared in the Employment Relations Authority, Employment Court, District Court and High Court, and frequently represents clients in negotiations and mediations. Jodi is a member of The Law Association, and its Employment Law Committee, as well as the New Zealand Law Society. Her expertise in the employment law sector has been recognised by the major legal directories, including Chambers Asia-Pacific. Jodi enjoys the people factor in employment law and being involved in the employment law issues facing clients who operate in different industries and professions. She brings a pragmatic approach to legal issues with a focus on client communication and delivering practical and commercial outcomes. Connect with Jodi via LinkedIn.
Bridget studied at the University of Auckland and obtained a Bachelor of Laws (Honours) and a Bachelor of Arts majoring in Politics and International Relations. She first worked with Hesketh Henry as a summer clerk at the end of 2021. In February 2023, she re-joined the firm in the Employment Law Team. Bridget completed her Professional Legal Studies Course earlier this year and will be admitted as a Barrister and Solicitor of the High Court in November of this year. Her particular interests are privacy and human rights issues in employment, having written her dissertation on the same topic with a specific focus on out of work conduct and the use of social media and surveillance technology. Connect with Bridget via LinkedIn.
