With the publication in the Official Journal of the European Union of Directive 2023/970 which introduces new employee protections and new employer obligations on equal pay and transparency ‘the Member States of the European Union have the obligation to adapt their local laws by encouraging (and also imposing) pay transparency also in the private employment relationship. What this will entail in practice can be assessed on two levels. The first is ‘what will change in form’. First and foremost, the disclosure obligations of employers will change. The reason for the introduction of these unprecedented transparency obligations in the private sector (where the confidentiality of individual bargaining is still often a critical factor) lies in the fact that gender pay inequality is a rather visible phenomenon’. Thus, with Adnkronos / Labitalia, Alberto De Luca, partner of De Luca & Partners, a law firm specialised in labour law.
De Luca points out that ‘the European average shows in fact a gender pay gap in favour of male workers of around 13%. It must be said, and this figure may seem a good starting point, that Italy is one of the most successful countries in this area, with around only a 5% gap. What will change “in substance” is harder to say,’ he explains.
According to the expert, ‘it will not only be the gender pay balance that will change but the entire system of internal transparency of the pay levels of colleagues and co-workers’.
But when will the directive take effect in our country? ‘The Directive entered into force on 6 June 2023’ explains De Luca ‘and Member States will have three years to comply, namely by 7 June 2026, under penalty of infringement proceedings against those States that fail to do so. In order to comply with the provisions of the Directive, each Member State (including Italy) will have to adopt all the necessary legislative measures to ensure pay transparency also in the private sector,’ he explains.
‘With regard to the “how”, the Directive’ the expert points out, ‘requires the introduction of regulatory obligations requiring employers to provide adequate information on wages and salary levels to both job applicants and existing employees. In this respect, the Directive prescribes that, applicants for a job position must be ensured the right to receive all information on the pay levels related to a specific job (if applicable, on the relevant provisions of the national collective bargaining agreement applied by the employer in relation to the position), while all male and female workers should have access to information on individual pay levels and average pay levels broken down by gender, by personnel categories or by similar duties’.
According to De Luca, ‘employers must then be prevented from seeking information from applicants on pay received in current or previous employment relationships. In order to ensure that the transparency mechanisms introduced operate, an obligation for employers to inform all male and female employees annually of their right to receive this information, which – in any case – will also have to be mandatorily communicated to the designated authority by those employers with more than 100 employees’, he adds.
‘The latter information’ the expert emphasises ‘will also have to be provided to male and female workers’ representatives, labour inspectorates and equality bodies, that will also have the right to ask for further details on any data provided, including explanations on any gender pay differences. Turning to the timeframe, by 7 June 2031, Member States will have to provide the Commission with information on the implementation status of the Directive and its practical impact. Then, by 7 June 2033, the Commission will present a report on the implementation to the European Parliament and the Council’, he notes.
And when fully implemented, in application of the Directive, ‘the legislation’ explains De Luca ‘will have to provide for the obligation for employers to allow, by adopting appropriate mechanisms, all male and female workers to access information on individual pay levels and average pay levels broken down by gender. Employers will also be required to prepare a description of the (neutral) criteria underlying the determination of pay and career advancement and will have to provide employees who request it with all information on the pay level’, he stresses.
According to De Luca, ‘Member States will have to ensure that employers provide information on their organisation, in particular on the gender pay gap (in supplementary or variable components) both in terms of allocation and quantification, describing the number of female and male workers in each pay quartile. It is also envisaged that employers with more than 250 workers, both male and female, will provide, by 7 June 2027 and every year thereafter, this information for the previous calendar year’, he points out.
‘The same obligations’ the expert explains ‘are envisaged for employers with between 150 and 249 employees, who will have to provide the information by 7 June 2027 and every three years thereafter, while employers with between 100 and 149 male and female employees will have until 7 June 2031 and every three years thereafter’.
So what will be the possible effects on labour legislation in our country? ‘Implementing the provisions of the Directive will undoubtedly require’ explains De Luca ‘some adjustments to pre-existing rules (providing for the timing and manner of making the required notifications to supervisory bodies such as, for example, the Italian National Labour Inspectorate or the relevant local offices). National collective bargaining,’ he adds, ‘will also be predictably affected, for instance by introducing specific notification or consultation mechanisms with trade union (corporate and non-company) stakeholders, as is already the case, for instance, with respect to employment and company performance data’.
According to De Luca, ‘in order to have an impact on the implementation of what is provided for, it is also to be expected that a control and/or sanctioning mechanism for breaches of the obligations provided for will be laid down in national legislation. With regard to this last aspect, as is also provided for in the recitals of the Directive, an important role will be reserved for the equality bodies, in terms of both monitoring and sanctioning powers. In this regard, the power to act in the name and on behalf of employees, which is already granted in some cases to equality bodies, would facilitate the effectiveness and economic viability of defending rights for those concerned,’ he emphasises.
And according to De Luca ‘the scope of the newly introduced legislation will add to the protections already in place and may even affect their scope. The first thing that comes to mind is the Italian Equal Opportunities Code [editor’s note, Italian Legislative Decree No. 198/2006], which already contains rules on equal pay. The new legislation will affect, and extend, the employer’s burdens in the event of complaints of pay discrimination behaviour’.
‘In this regard, it must be said’ he explains ‘that the Equal Opportunities Code already provides for a particular mechanism for sharing the burden of proof in the event of discriminatory behaviour, providing for a mitigated, rather than a “full” burden of proof on the complainant, in accordance with the general rules of civil proceedings, the burden of proving the lack of discrimination then resting on the employer. The guarantee regime of this burden, which is already significant, would be further extended, since the Directive expressly refers’, De Luca goes on to add, ‘to a true and proper reversal of the burden of proof” and the employer would in all likelihood also have to prove that he has correctly and promptly fulfilled all the relevant regulatory obligations’.
According to the expert, ‘it will be difficult, however, to think that any new items of damage will arise from the breach of the provisions implementing the legislation in question, since only the damage, in its various forms, that the injured party actually suffered will continue to be compensable. Finally, the arduous challenge posed by implementing legislation will be to answer a series of questions of no small “practical” impact: what will happen when there is no real benchmark? Let us consider the case of jobs assigned to one or only one employee. Will it be possible to use statistical data, or will it be necessary to refer to the real-time situation? What will the implementation of highly differentiated remuneration policies entail? How will employers be able to defend themselves against the risk (not least the certainty) of making their remuneration policies known to competitors? These are questions that will have to be considered in advance by the legislator so as to ensure that the impact of what seems to be a real small regulatory revolution on gender equality can be managed and safeguarded’, De Luca concludes.