On April 24, 2023, the EU Council adopted a new Pay Transparency Directive. The Directive is aimed to provide for more transparency and effective enforcement of the equal pay principle between women and men throughout the European Union, as well as to improve access to justice for victims of pay discrimination.
Key elements of the Directive are:
- Pay transparency for job-seekers: Employers will have to provide information on the initial pay level or its range in job advertisements or interviews. Moreover, applicants may not be asked about their pay history.
- Transparency of pay determination and pay development: Employers with more than 50 employees must make information on pay determination, pay levels and pay development easily accessible to employees.
- Right to information for employees: Regardless of the size of the company, employees can demand comprehensive information from their employer about their individual, as well as the average pay, for their positions and comparable positions, broken down by gender and employee groups. Furthermore, employees may not be prohibited from disclosing their compensation for comparative reasons.
- Reporting on gender pay gap: Companies with more than 100 employees must regularly publish information on the pay gap between male and female employees.
- Joint pay assessment: If pay gap reporting reveals a gender pay gap of at least 5 per cent which cannot be justified based on objective gender-neutral factors or was eliminated within six months of reporting, employers must conduct a pay assessment in cooperation with employee representatives.
- Claims for compensation: Victims of gender-based pay discrimination can claim damages and compensation (including back payments). In order to facilitate judicial enforcement, violations of the information requirements under the Pay Transparency Directive will result in a reversal of the burden of proof which will then be shifted to the employer. In certain cases, the courts may even require employers to submit evidence. Additionally, the Directive allows for legal actions by associations (such as employee associations, unions, etc.).
- Timeline: The Directive enters into force 20 days after its publication in the Official Journal of the EU and must then be transposed into national law by the EU member states within three years.
As a result of the Directive, employers may expect the German legislators to significantly amend the German Pay Transparency Act. Irrespective of this, gender-based pay discrimination is already prohibited in Germany and may be sanctioned by German labor courts (cf. most recently, for example, the decision of the Federal Labor Court of February 16, 2023).
Employers may therefore wish to review their company pay structures carefully already now.
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