Equal pay for equal work has long been a cornerstone of employment law, both in the European Union (EU) and beyond. Despite existing frameworks—such as Article 157 of the Treaty on the Functioning of the European Union (TFEU) and earlier directives that outlawed gender-based wage discrimination—persistent pay gaps remain. This gap has prompted the EU to strengthen its stance and introduce the new Pay Transparency Directive (EU 2023/970). It was adopted in 2023 and aims to empower employees with greater transparency, ultimately simplifying legal actions against employers who fail to ensure equal pay for equal or comparable work.
While previous directives and case law established the principle that men and women must receive equal pay for the same or equivalent work, the new directive makes it easier for workers to assess pay differences. Measures like mandatory pay transparency reports, clear criteria for salary progression, and access to equal pay reports on an employee level has set the stage for more robust enforcement of equal pay rights.
Possibilities for Lawsuits and Disputes
With the Pay Transparency Directive, it becomes simpler for employees and their representatives to initiate legal actions if any pay differences are identified. Under article 7 of the directive, employers must provide the employee with pay information upon request and justify any pay differences. If an employer cannot objectively justify these differences based on qualifications, experience, or objective externalities, the door opens for equal pay claims and lawsuits. Any pay differences must be defended with clear, objective, and non-discriminatory factors. However, as highlighted in landmark equal pay cases, these justifications often come under intense scrutiny, and employers must be particularly aware of the following areas:
- Qualification: Employers must demonstrate that to the degree that qualification is used as an objective parameter for defending pay, such as education or certifications, it must be proven that they are essential for performing the role. In cases like Hayward v Cammell Laird Shipbuilders Ltd, courts have emphasized that pay must reflect the value of the work itself rather than the label or classification assigned to the role. This means that even if roles appear different on paper, their underlying value must be evaluated holistically.
- Experience: Length and relevance of experience are valid factors, but courts require detailed analysis of how experience materially impacts the responsibilities or outcomes of a job. In cases like the Austrian Airlines maternity leave case (Decree of Supreme Court, 29 March 2012), the exclusion of maternity leave periods from seniority calculations was contested. However, the court ruled that such exclusions did not constitute indirect pay discrimination under Article 141(1) TEC, as seniority benefits tied to the collective agreement were not directly classified as pay. Nevertheless, the case underscores the need to ensure that practices related to experience do not disproportionately disadvantage certain groups, such as women, as this could lead to claims of indirect discrimination.
- Market Rates: Pay disparities often arise from business justifications, such as market-based adjustments or performance incentives. However, the courts require extensive documentation indicating the market rate at that time. For instance, in a Swedish Labour Court case, a hospital justified paying a technician more than a midwife—despite their work being of equal value—on the grounds of market rates, arguing that technicians had alternative higher-paying opportunities. While the court accepted this justification, it underscored the need for objective, transparent evaluations to ensure such disparities are not rooted in gender bias. This demonstrates that while market rates can justify differences in pay, they must be applied fairly and backed by clear, non-discriminatory evidence.
- Work of Equal Value: Courts have consistently emphasized the principle of "equal pay for work of equal value," as outlined in Article 157 of the TFEU. This principle goes beyond job titles and classifications to assess work based on skill, effort, responsibility, and working conditions. In the Glasgow City Council case, undervaluation of roles traditionally held by women (e.g., care staff) compared to male-dominated roles (e.g., refuse collectors) resulted in settlements of more than €600m, underscoring the importance of unbiased job evaluations.
- Collective Bargaining: Collective bargaining agreements are designed to standardize pay and working conditions, but they can sometimes unintentionally maintain unfair pay gaps. In the Enderby v. Frenchay Health Authority (1992) case, the Court of Justice of the European Union (CJEU) found that even if pay differences are part of a collective agreement, they could still be considered indirect discrimination. The employer couldn’t simply rely on the agreement as a defense and had to provide valid reasons for the pay gap between male-dominated and female-dominated roles.
In practice, this new level of transparency can:
- Enable employees to compare wages more easily and spot discriminatory patterns.
- Encourage collective actions or class-based claims where systemic pay discrimination exists.
- Reduce the evidentiary burden on employees in discrimination disputes—shifting more responsibility onto employers to prove compliance with equal pay principles.
As a result, non-compliant organizations could face not only reputational damage but also substantial financial liabilities, ranging from individual compensation claims to large-scale settlements.
Compensation and Remedies
In cases where the courts determine that discrimination has taken place, the employees filing the suit may be entitled to various forms of compensation and remedies, including:
- Back Pay: Backpay in pay equity claims can lead to substantial financial liabilities. Employees found to be underpaid have the right to claim backpay and foregone earnings for the entire period of underpayment. For instance, in 2021, the EU Court ruled against Tesco, resulting in potential backpay claims exceeding £2.5 billion for 25,000 female employees underpaid for at least seven years. This shows the importance of proactively mitigating costly claims.
- Interest and Penalties: Courts and tribunals often add interest or impose fines on employers to ensure compliance and deter future violations.
- Injunctive Relief: Injunctive relief requires that discriminated employees be placed in the position they would have been in otherwise, often resulting in significant increases in salary budgets. Companies may need to revise pay structures, conduct audits, and ensure compliance. For instance, in 2022, Google paid $118 million to settle a pay disparity case and committed to revising policies and conducting audits, underscoring the substantial financial impact of such rulings.
- Penalties and fines: Under the EU 2023/970 Directive, non-compliance with pay transparency rules can result in significant fines and escalating legal costs. These penalties are designed to be proportionate and dissuasive, posing serious financial risks. Employers must act proactively to avoid costly claims and ensure compliance with transparency and equality obligations. The fines are per legal entity, and will be set on a national basis.
Under the EU Pay Transparency Directive, remedies could become more substantial as transparency efforts reveal broader patterns of inequality. In turn, this might incentivize employers to proactively ensure fair and equal pay practices before disputes arise.
Notable cases on equal pay claims
Nordic Countries
- Case C-109/88 Danfoss: In this landmark decision involving a Danish employer, the European Court of Justice (ECJ) found that where statistics show a pay gap and the employer uses subjective pay-setting criteria, the burden shifts to the employer to justify these differences. The Danfoss ruling underscored the principle that employers must demonstrate objective, gender-neutral reasons for pay disparities.
- Case C-400/93 Royal Copenhagen: Another Danish case, Royal Copenhagen reinforced the requirement of equal pay for equal work. The ECJ clarified that employers cannot justify pay differences based solely on factors traditionally linked to male-dominated roles. Instead, they must ensure that any differentiation is based on objective and transparent criteria. Both Danfoss and Royal Copenhagen strengthened the legal foundation for challenging discriminatory pay structures in the Nordic region and the EU at large.
Europe
- France, Court of Cassation of 12 february 1997, No. 95-41694: A female mushroom packer successfully challenged her employer for systematically paying her less than male counterparts performing the same role. The Court of Cassation ruled that the employer had no objective justification for the disparity, establishing that men and women performing the same work must be compensated equally. The employer was required to compensate the plaintiff for the pay gap, including backpay and legal costs.
- Spain, Supreme Court of 14 May 2014, No. 2328/2013: The Spanish Supreme Court ruled in favor of female maids working in a hotel who were paid less than male bartenders despite their roles being classified at the same wage level in the collective agreement. The court found that the work of maids was of equal value to that of bartenders and ordered pay adjustments, ensuring equal treatment and back pay for the affected employees.
- Ireland, Case C‑427/11, Margaret Kenny and Others v Minister for Justice, Equality and Law Reform and Others: The ECJ addressed claims of unequal pay and indirect sex discrimination. Female civil servants in Ireland argued they were paid less than male colleagues performing similar clerical duties. The ECJ examined whether the pay disparity was justified under Article 141 EC and Directive 75/117/EEC. The Court emphasized that the employer must prove the pay difference corresponds to a real need, is appropriate, and necessary. The national court was tasked with determining whether these conditions were met. This case highlights the need for clear, objective justification in cases of indirect pay discrimination.
UK
- Glasgow Case (City Council Equal Pay Claims): In Glasgow, thousands of female council workers, from school cleaners to care workers, successfully claimed that they were systematically paid less than male colleagues in equally demanding roles. The case culminated in a large-scale settlement, with the total payout estimated at £500 million. The large-scale settlement highlighted the potential for collective redress and the importance of transparent grading systems.
- Birmingham Case: Similar to Glasgow, female workers in Birmingham brought a collective action against the City Council, alleging that bonuses and benefits disproportionately favored male-dominated positions. The council reached a settlement valued at £1 billion, one of the largest equal pay settlements in the UK at the time. The settlement brought significant attention to the underpayment of female public-sector workers and emphasized that historical pay structures may require thorough overhaul.
