As we have been reporting in recent editions of Employment Brief, the Equality Act 2010 is due to come in to force in October 2010. One of the provisions that has attracted significant media coverage and comment is the proposed ban on pay secrecy clauses in employment contracts. This month we look in more detail at the provisions that the Act will introduce on this topic.

The Government has stated:

“the Equality Act will ban pay secrecy or ‘gagging’ clauses which stop employees discussing their pay with their colleagues. This does not mean that people will be compelled to disclose their pay details. But in situations where colleagues work closely together but are paid different amounts or have different packages, it is right that they should be able to compare them if they want to.”

In fact, the Equality Act will not ban secrecy clauses per se. What it will do is prevent employers from enforcing such clauses where an employee discusses their pay with a colleague to find out if they are paid differently because of a discriminatory factor such as gender, race or age etc. This will be a “relevant pay disclosure” about which an employer could not seek to enforce its secrecy clause and about which the employee would be protected from detriment.

The context of pay conversations and the reason behind them is key – secrecy clauses will remain valid for any disclosure that is not a “relevant pay disclosure”. For there to be a “relevant pay disclosure”, the prospect of discrimination must have crossed the employee’s mind before the conversation about pay takes place. This may prove no assistance to an employee who considers he or she is being paid unfairly in comparison to a colleague but where there is no suggestion of an unlawful discrimination. The scope of what amounts to a “relevant pay disclosure” is likely to be the subject of litigation in future.

In addition to protecting an employee who makes the enquiry about pay, the Equality Act will also protect the other colleague who discloses the pay information to the curious colleague. However, employees are under no obligation to reveal their pay details if asked by a colleague.

One further move aimed at achieving pay transparency is the provision in the Equality Act allowing the Government to introduce Regulations requiring employers in the private sector with 250 or more employees to publish pay audits for the purpose of showing whether there is any difference in pay between male and female employees. It is not yet clear whether the new coalition Government will bring this provision in to force.