Promoting equality between men and women and combating discriminatory treatment in general is one of the fundamental pillars of an advanced democratic society and one of the stated objectives of the European Union. Expressions of the principle of equal treatment and non-discrimination can be found across the founding treaties of the European Union, in the Charter of Fundamental Rights of the European Union and in numerous other EU legislative acts.
These were complemented in May 2023 by Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023, which strengthens the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms (the “Directive”), and which introduced new tools to eliminate gender pay inequalities.
Member States are required to transpose the Directive by 7 June 2026 at the latest.
Current legislation in the Czech Republic
Although equal pay and the prohibition of gender discrimination are not new requirements in the Czech legal system, the Czech Republic has long lagged behind other EU Member States in this area.
Current legislation, expressed in particular in Act No. 262/2006 Coll., the Labour Code, as amended, and Act No. 198/1999 Coll, the Act on Equal Treatment and Legal Means of Protection against Discrimination and on Amendments to Certain Acts (Anti-discrimination Act), as amended, imposes an obligation of equal treatment on employers and prohibits direct and indirect discrimination on the basis of sex or gender identity, under the threat of penalties of up to one million Czech crowns, however does not yet contain any specific tools to enable employees to find out whether or not they are being treated less favourably in the field of remuneration. Actually, it is quite common practice for employers to conclude highly problematic confidentiality clauses with employees regarding the amount of remuneration received. However, this is all set to change in the future.
Although no draft transposition of the Directive into Czech law has yet been published, the requirements of the Directive are clear. The Ministry of Labour and Social Affairs is currently working on a first draft together with partners, employers, associations and trade unions.
Objectives of the Directive and planned changes
The adopted Directive aims to strengthen gender equality in the field of pay. This is to be achieved in particular by requiring an increased level of transparency on the part of employers.
The main changes introduced by the Directive are:
- the obligation to set criteria for remunerating employees,
- the right of applicants to information on starting salaries,
- a ban on confidentiality agreements concerning remuneration,
- the right to a comparison with other colleagues in a similar position,
- reporting obligation for employers with more than 100 employees,
- the obligation to carry out joint pay assessments,
- shifting the burden of proof in litigation to the employer, and
- the possibility of awarding reimbursement of costs even to an employee who is not successful in the case.
We discuss some of the individual changes in more detail below.
Pay transparency in hiring
In accordance with the Directive, employers are now to have information obligations towards job applicants before the employment relationship is established, and before the applicant attends a job interview.
The employer is now obliged to inform the job applicant about the starting salary for the position or the salary range.
The employer is obliged to determine such figures based on gender-neutral criteria. Such criteria may include, for example, the applicant’s educational qualifications, previous experience or the complexity of the work performed. The Directive thus aims to make the recruitment process much more transparent on the part of the employer, thereby protecting the applicant from his or her first contact with the employer. In addition to information on salary, the employer should also be obliged to provide the applicant with relevant information on the provisions of the collective agreement that it applies in relation to the advertised position.
How the employer achieves the required information transparency in pay negotiations is left to the employer’s choice. They may do so, for example, by stating the relevant criteria and the amount of the salary directly in the vacancy notice, or by communicating them to the candidate before the interview, e.g. by e-mail or telephone.
Another new measure is the prohibition on the employer to make any enquiries during the interview about the applicant’s pay history in their previous or current employment relationships. Such enquiries are not permitted under the new Directive.
Prohibition of confidentiality agreements on remuneration and the right of comparison with others
Another instrument of the Directive to achieve equal pay is the prohibition of confidentiality agreements.
At the same time, employees will also be given the right to request information on how their remuneration compares with that of their colleagues in a similar position. Of course, they will not know the exact amounts of the remuneration of others but will only receive information on the average pay levels of workers performing work of equal value, broken down by sex.
This should take the fear out of pay bargaining and make employees more interested in the rules for pay increases. One of the foreseen consequences would be the levelling out of the pay gap between regions.
Employers will be required to provide the comparison upon the employee’s request, and within a reasonable period of no more than two months. Employers must properly inform their employees of the right to request this information.
Employers’ reporting obligations and joint assessment
Another mechanism to increase transparency of remuneration is the reporting obligation for employers with more than 100 employees. These employers will be obliged to produce and publish reports on gender pay gaps at regular intervals.
The obligation is to be phased in as follows:
- employers with 250 or more employees – from 7 June 2027 they will be required to submit a report annually,
- employers with between 150 and 249 employees – from 7 June 2027, they will have to submit a report every three years,
- employers with 100 to 149 employees – will have to file a report every three years until 7 June 2031.
In order not to impose an undue burden on small businesses, employers with fewer than 100 employees are exempted from this obligation. They can report voluntarily.
In order to ensure gender equality, the reporting obligation is linked to the so-called obligation to carry out a joint pay assessment, which arises if all the following conditions are met at the same time:
- the employer is an employer with at least 100 employees (i.e. has a reporting obligation),
- a gender pay gap of more than 5% has been identified in the report; and
- the employer does not justify the difference on objective and gender-neutral criteria or does not remedy it within six months of the submission of the report.
Such an employer will be obliged to carry out a joint pay assessment with its employees’ representatives. The aim of the joint assessment is to identify the causes of the differences in pay, to eliminate such causes and to take preventive measures to avoid the causes of the differences.
Procedural protection
Important changes will also occur in the case of equal pay litigation between the employee and the employer, where the burden of proof in equal pay disputes is to be shifted onto the employer. The employer will be obliged to prove that pay discrimination did not occur. Success in litigation will depend, in particular, on the correct remuneration rules and their application. The same principle already applies in other discrimination disputes.
In addition to the above reversal of the burden of proof, the Directive also introduces the right of the court to order the employer to disclose all evidence, including confidential information. Evidence containing confidential information will then be subject to special protection to prevent disclosure of this information to persons not involved in the litigation.
In order to ensure that the existence of legal fees is not an obstacle to the employee’s pursuit of their rights, in contrast to the general rule of the unsuccessful litigant paying the costs, the Directive protects employees in pay discrimination disputes if it is demonstrated that the grounds for bringing the action were reasonable and that there are grounds for exempting the employee from paying the costs.
Requirement of equal pay for tenderers for public contracts
The Directive leaves Member States a certain degree of flexibility in the regulation of public tenders. Member States may require employers participating in public contracts to comply with the principle of equal pay. These employers may then face exclusion from the tendering procedure or termination of the contract. However, whether Member States introduce this equal pay requirement is entirely at their discretion.
Conclusion
The Directive represents a key step in the EU’s efforts to combat pay discrimination. By introducing new employer transparency requirements, the EU sends a clear signal of its commitment to addressing gender equality and the persistent problem of gender discrimination in labour law.
Although we do not yet know the exact form of the transposition, it is already clear that it will have a major impact on employers or employees. In particular, company management and HR departments, who will bear the main brunt of the new obligations, need to prepare.
The text of the Directive is available here.
We will continue to monitor developments on the topic of pay transparency for you. If you have any questions about the new Directive or any related issues, please do not hesitate to contact us.
Mgr. Jakub Málek, managing partner – malek@plegal.cz
Mgr. Kateřina Vyšínová, junior lawyer – vysinova@plegal.cz
Rozálie Polášková, legal assistant – polaskova@plegal.cz
14. 11. 2024