The European Parliament approves the proposal for a directive on the pay gap

In a plenary session on March 30, 2023 the European Parliament approved the proposal for a directive 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 new directive will lay down specific transparency and reporting obligations for companies, which will start right from the recruitment process. In this way, staff recruitment processes will be required to be led in a non-discriminatory manner, employers will not be able to ask applicants about their pay history and it will have to be ensured that the announcements are gender neutral. Additionally, the job applicant will be entitled to receive information on the initial pay or initial pay range for the job they are seeking, as well as on the provisions of the applicable collective bargaining agreement.

The future directive also enlarges on the transparency obligations and information rights of employees during their employment relationship, and lays down a duty to make accessible to the staff a description of the criteria used to define employees’ pay, pay levels (gross annual pay and gross hourly pay) and pay progression. Moreover, employees will be able to request information on their individual pay level and the average pay levels, broken down by sex, for categories of employees doing the same work as them or work of equal value to theirs.

The proposal for the directive specifies an obligation for companies with more than 100 employees to provide, following consultation with the employees’ representatives, specific information on the pay gap, which they will have to communicate to the competent authority and update yearly if they have 250 employees or more, or every three years if they have fewer employees. The employees’ representatives will have access to the methodologies used by the company for the elaboration of the information. It expressly states that member states may require companies with fewer than 100 employees to provide this same information.

In relation to this information, the new legislation will ensure that companies have to carry out a joint pay assessment with the employees’ representatives if it is determined from the published information that there is a pay gap of, at least, 5% in any category, which has not been justified by objective and gender-neutral factors and that unjustified difference has not been offset in six months following the date of the submission of the information.

The key points in relation to remedies and enforcement are as follows:

• Reversal of the burden of proof where a person who considers himself/herself wronged provides evidence of facts allowing direct or indirect pay discrimination to be presumed.
• Access to claim proceedings and the right to obtain full reparation for the person affected by the infringement of rights or obligations relating to the equal pay principle.
• The chance for equality associations, organizations and bodies, and employees’ representatives or other entities with a legitimate interest in ensuring equality between men and women to participate in any administrative or judicial process in respect of a potential infringement of the rights or obligations relating to the equal pay principle, acting for and on behalf of any employee who is a potential victim, with that person’s authorization.
• The proposal for the directive states that member states will have to provide the applicable penalty rules, from the standpoint that the penalties must be effective dissuasive and proportionate.

The proposal approved by the European Parliament lays down a three-year period for transposition of the directive by the member states. The provisions in the final version will apply in any case.

Now that it has been two years since the European Commission presented its proposal on March 4, 2021, the next step is for the European Council to adopt the directive, before its publication in the Official Journal of the European Union.