On 30 March, the EU Parliament formally approved the Directive ‘to strengthen the application of the principle of equal pay or work of equal value between men and women through pay transparency and enforcement mechanisms’ (the Directive).
1.
This new piece of European legislation has attracted quite some attention in both general and legal media. The focus of that attention has largely been drawn to the required reporting on gender pay and the broader gender pay transparency rules, including a mandatory joint pay assessment (including remedial action) whenever gender pay gaps exceed 5% without proper justification. These compliance reporting rules (Chapter II of the Directive) are progressively applicable to all businesses with 100 or more employees in any member state. Depending on the workforce size in any member state (+100, +150 or +250 workers), both the entry into effect of the reporting rules and the subsequent frequency of reporting are spread out.
2.
So far, less attention has been paid to the second substantive part of the Directive, dealing with remedies and enforcement of the gender-based equal pay rules (Chapter III). These rules apply to all businesses operating in the EU irrespective of size, origin or industry (including the public sector).
The key objective of the Directive on that score is to ensure that the basic right of ‘equal pay for equal work or work of equal value between men and women’ (‘the Principle’) will finally be effectively enforceable and enforced on the ground throughout the EU.
To this end, the Directive launches a series of clear and strict rules which the member states must introduce into their national legal systems when transposing the Directive. The deadline for doing so will be somewhere in the second quarter of 2026, three years after the entry into force of the Directive, which itself will occur 20 days after its publication in the OJ (which publication will follow the imminent formal adoption of the Directive by the EU Council).
3.
In substance, some of these enforcement rules are severe and strict, not in the least because some deviate from general civil procedure rules in some member states and appear to impose cumbersome obligations upon any respondent (i.e., employing entities or business). Here are a few examples:
Any worker who feels wronged by a failure to apply the Principle must have easy access to courts, also after the end of the employment relationship. The alleged victim and any association, organisation, equality body, workers’ representatives or other entities which have a legitimate interest may engage in proceedings and may act on behalf or in support of a worker. It is unclear from the Directive whether this would allow ‘class action’ type proceedings but that appears not to be excluded.
In case of infringement of the Principle and resulting damage, the worker must be able to receive real and effective compensation and reparation, to put victims in the position in which they would have been had they not been discriminated against. The financial remedy must include full recovery of back pay and related benefits in cash or in kind, with interest, compensation for lost opportunities and non-material damage, all without any upper limit.
Also, infringement of the Principle must be sanctioned by effective, proportionate and dissuasive penalties, guaranteeing a real deterrent effect and considering aggravating or mitigating circumstances.
Beyond financials, injunctive relief and an order for measures to ensure the application of the Principle, in line with national laws, must be provided for. Such orders can be accompanied by penalties (‘astreintes’). The question arises whether such penalties are compatible with other legal sources (e.g., the Benelux Treaty on the Introduction of Uniform law on Penalties), and whether the possibility to order employers to make structural changes does not violate the principle of relativity of court proceedings.
As in general discrimination law, the burden of proof for the existence of discrimination on the Principle shifts to the employer whenever the alleged victim submits facts from which it can be presumed that such discrimination occurred. In this context, failure to observe the pay transparency obligations referred to above leads to such a shift in the burden of proof.
Substantively, when assessing whether workers of different gender are carrying out the same work or work of equal value, the question of being in a comparable situation is not limited to workers employed with the same employer nor at the same time as any claimant. In case no real comparison is available, statistics or a fictitious comparison can be used to prove alleged pay discrimination.
In any event, courts or competent authorities are allowed to order the disclosure of any relevant evidence, including confidential information considered to be relevant (subject to protection from public access). This point raises fundamental issues as regards evidence production (full disclosure?) and legal privilege.
There are a few striking points in the Directive when it comes to limitation periods (or time bar) for bringing claims under the Principle. First, the limitation period shall not start before an alleged victim is aware (or can reasonably be expected to be aware) of an infringement. Member states can decide to have the time bar start running only after the infringement stops or after the end of the employment relationship. In any event, the time bar cannot be shorter than three years. The limitation period is suspended or interrupted once a complaint is filed with the employer, or a proceeding is started with labour inspectorate services or an equality body.
Also, member states may decide that claimants can never be financially responsible for bringing claims when they do not prevail by not requiring unsuccessful claimants to pay the costs of the proceedings.
Finally, claimants and their representatives (‘any person supporting another person in the protection of the latter’s rights’) shall be protected against adverse treatment, including against dismissal.
Some of the above rules raise legal issues under national laws, be it of civil procedure or more fundamental rights (of privilege, fair trial, defendants’ rights, etc.). Within Bird & Bird, a comparative table is being prepared to address such issues, covering many EU jurisdictions. This will allow for a proper assessment of the Directive’s impact on the ground, in particular the enhanced remedies for gender pay claims.
Stay tuned.
For further information, please contact:
Pieter De Koster, Partner, Bird & Bird
pieter.dekoster@twobirds.com
