Understanding pay secrecy clauses

Understanding pay secrecy clauses

There is a common misconception that the Equality Act bans ‘pay secrecy clauses’ in Contracts of Employment.

The truth is that section 77 of the Equality Act does not impose a general ban on any terms in the contract preventing pay discussions, but it does render pay secrecy clauses unenforceable if the employer is trying to stop or restrict employees from making ‘a relevant pay disclosure’.

A relevant pay disclosure refers to a contractual clause which prevents pay discussions that try to establish whether there is any discrimination going on, for example, on the basis of sex. It covers discussions between colleagues (this includes former colleagues) and trade union representatives.

So imagine one of your female employees suspects she is not paid the same amount as her male colleague, despite the fact that she does the same job and has the same level of seniority. One day, when the office is quiet, she asks her colleague what his base salary is. When he tells her, you find out and decide to deny him training opportunities as a result. In light of this unfavourable treatment, the male colleague could lodge a claim to an Employment Tribunal against you for victimisation.

However, if over a lunch break, a group of your employees are chatting about their performance bonus with some complaining how little they received and others boasting about how much they have earned, this will not fall within the scope of section 77. This is because they are not talking about pay with the aim of finding out whether and to what extent there are discriminatory differences in pay.

If, on the other hand, one of your employees discusses their pay arrangements with someone at a competitor organisation, they will also not fall under the scope of section 77. This is because the discussion was not with a colleague or a trade union official. Nevertheless, if you have a confidentiality clause in the employee’s contract, you can take action against them.

The big problem with section 77 of the Equality Act is how do you know if the employee is trying to find out whether there is discrimination going on, or just indulging in some workplace chit chat? Technology may have advanced, but there isn’t a device or gadget which allows us to read people’s minds or deduce their intentions accurately!

We would recommend you seek legal advice if you would like to review ‘pay secrecy’ clauses in your Contracts of Employment and/or have specific queries or concerns about their use.

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