Rita Canas da Silva and Ana Margarida Cerqueira from Sérvulo Scandinavian Desk give us an update on the pay transparency directive proposal. This text is a part of the *CLS Quarterly Outlooks.
On March 4th, 2021, it was presented a proposal for a Directive of the European Parliament and of the Council to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.
The proposal provides for key aspects, from wage-setting mechanisms or wage structures that assess the value of work, to the right to know the pay levels of employees performing the same work, as well as obligations for large companies to provide information on pay gaps and, in cooperation with employees' representatives, to assess and correct unjustified pay differences.
The proposal also strengthens the options available for employees to claim their rights and facilitates access to justice. Employers will not be allowed to ask jobseekers about their pay history in former employment relationships and, at the request of the employee, will have to submit anonymized pay data.
In general, the legislative proposal focuses on two key aspects of equal pay: a) pay transparency measures; and b) better access to justice in case of pay discrimination.
Regarding pay transparency:
· Salary transparency for job seekers - employers have a duty to indicate the level of initial remuneration or its range, based on objective and gender-neutral criteria, to be paid to the future employee for a particular position or role. Such information must be published in job vacancy notices or provided to candidates before the job interview without they having to request it. In addition, employers are prohibited from asking prospective employees questions about their pay history in former employment relationship.
· Employees’ right to information - employees have the right to request the information necessary to enable them to assess whether they are paid in a non-discriminatory manner compared to other employees of the same organization carrying out equal work or work of equal value, and to assert their right to equal pay, where applicable. Employers are required to inform all employees, on an annual basis, of their right to receive such information and to provide the requested information within a reasonable time and in accessible formats to all, where requested.
· Information on the gender pay gap - employers who employ at least 250 (two hundred and fifty) employees have a duty to make publicly available and accessible information on pay gap between male and female employees. Internally, they must also provide information on the pay gap between male and female employees by categories of employees performing the same work or work of equal value.
· Joint pay assessment - employers have a duty to carry out a pay assessment in cooperation with employees’ representatives if pay information shows a pay gap of at least 5% that is not justified on the basis of objective, gender-neutral factors. The requirement of a joint pay assessment aims at triggering mandatory action on the part of employers in order to address any potential gender bias in pay structures infringing the equal pay principle.
With regard to pay transparency measures, there are also several aspects to be highlighted:
· Right to compensation – the employee has the right to claim and to obtain full compensation for the harm caused and to be placed in the position in which would have been if no discrimination had occurred.
· Shift of burden of proof - it is for the employer to prove that there has been no breach of the principle of equal pay.
· Penalties - Member States should provide for minimum standards on penalties to apply to any infringement of the rights and obligations related to equal pay. Any penalties set in the Member States should include fines, the amount of which must consider several aggravating factors, such as the gravity and duration of the infringement, as well as any intent or serious negligence on the part of the employer.
The proposal is expected to be adopted soon, as the Parliament, the Council and the Commission reached a provisional agreement on the proposal on November 30th and finalized its wording on December 15th, 2022. Once adopted, Member States will have two years to transpose the Directive into national law.
Prof. Rita Canas da Silva, Partner & Head of the Employment Law Department
Ana Margarida Cerqueira, Trainee Lawyer
Sérvulo Scandinavian Desk
*This text is a part of the article series CLS Quarterly Outlooks. Once every quarter, CLS asks experts within three areas, sustainability, legal, and economy, to comment on main trends and insights within their respective sector. The CLS Quarterly Outlooks highlights the Portuguese market with the aim of giving an overview to the international business community. Do you have suggestions or want to contribute to the CLS Quarterly Outlooks please send an email to .
