In the last few years, the gender pay gap has become increasingly topical and several studies and statistical reports have been published on the issue.
An increasing number of countries, including Italy, have either adopted or begun adopting specific regulations mandating equal pay regardless of gender, and provided for specific gender pay reporting obligations. For example, this is the case in the UK where gender pay gap reporting legislation has recently been introduced, and in Norway, where a similar regulation came into force in 2018.
The increased media attention and developing regulations on this issue have contributed to a rise in employer awareness regarding the potential consequences arising from non-compliance with obligations on gender pay equality and gender pay reporting. As a matter of fact, I have personally noticed a considerable increase in the number of requests I receive from my clients for advice on such topics.
A recent multijurisdictional survey on gender pay gaps conducted by Ius Laboris demonstrated that this trend is not only found in Italy, but also in other countries, both in and outside the EU.
Equal pay for equal work?
With regard to equal pay between men and women, it should be noted that, in Italy, there is no general principle of ‘equal pay for equal work’ that is not specifically linked to discriminatory grounds, meaning that employees can receive different salaries even if they perform the same duties, as long as the basis for the pay difference is not discriminatory. In fact, there is a general non-discrimination principle under which any act or agreement is null and void if it directly or indirectly provides for different treatment on the basis of factors such as race, ethnicity, language or gender.
Legal frameworks similar to the Italian one can also be found in other countries, such as Austria, where, in spite of the fact that there is broadly no general principle of ‘equal pay for equal work’ that is not specifically linked to discriminatory grounds, Austrian courts have established a legal principle prohibiting employers from treating an individual employee differently from other employees (in terms of working conditions, compensation and fringe benefits), unless they have justifiable cause to do so. The situation is similar in Germany, where, irrespective of a general ‘equal pay for equal work’ principle, salaries are a matter for negotiation (unless mandatory provisions apply), making differing salaries possible. Similarly, under the Equality and Anti-Discrimination Act in Norway, equal pay for equal work is specifically linked to gender discrimination.
By contrast, unlike in Italy or in the other previously mentioned countries, France has a general principle of ‘equal pay for equal work’ that is not specifically linked to discriminatory grounds, and this principle has been supported by case law since 1996. A similar approach is also taken in Mexico, where the Mexican Federal Labour Law provides (as a general rule, not specifically linked to any discrimination grounds) that equal work performed under the same conditions (in terms of position, schedule and efficiency), must receive equal pay. Finally, further examples include Russia, where, under the Russian Labour Code, all employers are obliged to provide employees with equal pay for work of equal value according to a general principle that is not specifically linked to discriminatory grounds. In the USA, the Equal Pay Act of 1963 requires organisations to pay workers of either sex the same wages for equal work.
Is wage discrimination limited to pay?
Having described the general legal framework, it would be useful to add that in Italy, there is a regulation on gender pay equality that prohibits the unequal treatment of employees based on their gender, including in relation to remuneration. In particular, Art. 28 of Legislative Decree 198/2006 (‘Prohibition on wage discrimination’), entitled the ‘Code of equal opportunities between men and women’ (hereinafter, the ‘Code’), prohibits all direct and indirect discrimination relating to any aspect or condition of remuneration in relation to the same job or a job considered as having the same status.
It is important to clarify that the gender equality regulation in Italy takes into consideration elements other than simple remuneration: as a matter of fact, Art. 29 of the Code, ‘Prohibition on discrimination concerning work and career progression’, prohibits any discrimination based on gender with regard to the assignment of a job level, tasks or career progression.
Other countries such as Austria, Norway, France, Poland and the USA also have specific legal regulations on gender pay equality, which take into account elements other than compensation.
By contrast, in India, there is no statute providing for consideration of aspects other than remuneration for the purpose of gender equality. However, there is a developing trend of multinational companies becoming more sensitive to these factors as well. In Mexico, no specific law provides for the inclusion of aspects other than compensation, but it is the criteria used by local Labour Boards when resolving employment-related disputes.
There is also a regulation in Italy relating to the obligation to report gender pay differences. Under Article 46 of the Code (‘Reporting on the personnel situation’), public and private companies employing over 100 people are required to draw up a report at least every two years, containing information on male and female employees with specific reference to their working conditions and especially their overall remuneration. The report must be shared with union representatives and with the competent public authorities established by the Code, which will then process the data collected and transmit it to the Ministry of Labour.
It may be useful to clarify that in Italy employers are not directly required to draw up an action strategy for reducing gender pay gaps revealed by this report (if any). However, under Article 37 of the Code, if discrimination is found, the company can be required to produce an action strategy aimed at reducing the gender pay gap within a maximum of 120 days.
A regulation providing for an obligation to report gender pay differences also applies in Germany for employers with generally more than 500 employees. In Norway, not only must all companies report gender pay differences, but undertakings with more than 50 employees are also obliged to issue a statement concerning measures that have been implemented to promote equality. Likewise, employers with more than 50 employees in France must present an annual report to the works council addressing gender equality.
Penalties for failing to address the gender pay gap
It is very important for employers to be aware of the existence of any regulation mandating equal pay regardless of gender, as well as any gender pay gap reporting legislation, given that there are often specific sanctions for companies that fail to comply.
For example, in Italy, the law provides for administrative penalties for companies that do not comply with their reporting duty or where discrimination is found. Furthermore, according to Art. 40 of the Code, the burden of proving there is no discrimination is placed on the employer if the employee cites factual elements (including those deriving from statistical data and relating to remuneration) capable of providing grounds for the presumption of the existence of gender discrimination. In view of this rule, even if the results of a report do not in themselves directly give employees grounds for filing a claim, employees could use them as evidence of discrimination. Therefore, particular care should be taken when drafting this type of report.
France is another country in which there are specific sanctions for non-compliance with the gender pay equality principle or with any related reporting requirements. There is an obligation to negotiate with labour unions on gender pay parity and to negotiate a company agreement on gender equality: if an agreement is not reached, the employer must present an action plan. Criminal sanctions apply in the event of discrimination or in the event of obstruction to an employee representative’s role, and a significant penalty per month of non-compliance may be applied if the company does not have a company agreement or an action plan in place.
Tackling the gender pay gap: awareness, auditing and concrete actions
The trend is clear: an increasing number of countries, including EU member states, are introducing gender pay gap reporting legislation or gender pay equality rules. Issues relating to gender pay gaps are expected to arise more frequently, becoming a real issue for employers in terms of possible claims from individual employees, unions or even potentially class actions. Therefore, it is crucial that all employers conduct audits to check their compliance with any existing regulation mandating equal pay and the reporting of gender pay differences, taking action where necessary in order to reduce the company’s gender pay gap.
For this purpose, it is important to realise that a gender pay gap can be the result of numerous issues which are not linked to deliberate discrimination but to many different circumstances that disadvantage women in comparison with men. In this regard, women very often have more difficulty with career progression and in obtaining a related salary increase, perhaps as a result of career breaks taken for maternity leave or the responsibility they bear in caring for children. Although these kinds of issues are not always directly caused by employers’ decisions, employers can take appropriate measures to tackle them in order to avoid discrimination claims. Italy has made significant progress with this. In fact, in order to remove obstacles to equal opportunities and substantial equality between men and women at work, under Article 42 of the Code, employers in Italy are encouraged to adopt ‘positive actions’, and can be reimbursed for the related expenses. In addition to the above incentive, further opportunities for employers that want to ensure substantial equality between men and women have recently been introduced in Italy through specific regulations aimed at improving employees’ work-life balance.
Law no. 81 of 22 May 2017 also introduced the concept of ‘smart working’ in Italy: a new way for employees to perform their contracted duties. ‘Smart working’ allows employees to work wherever they want (off company premises, at home, in public spaces, etc.) and with more flexibility as to their working hours. Additionally, the number of benefits in kind excluded from employment income has been recently expanded; thereby encouraging employers to introduce private welfare benefit plans for their employees.
In conclusion, there is still work to be done in order to achieve substantial pay equality between men and women. However, employers now have the tools to at least attempt to reduce the gap as well as to manage the possible risks relating to non-compliance with the gender pay equality principle. The important thing is to identify issues in due time and take the appropriate measures before being forced to do so.
This article was first published in Euromoney’s Women in Business Law Expert Guide 2018.