Closing the gender pay gap: time for the Member States and all stakeholders to finally put their money where their mouth is

Statistics clearly show that not a single country in the European Union has managed to establish equal pay for women and men. In this blogpost, the eighth in RENFORCE Blog’s special series on the enforcement of EU law, Linda Senden and Rian Hesdahl argue that a major reason for this lack of progress is a strong reliance on individual-rights-based enforcement, before examining whether the new directive proposed by the European Commission is likely to significantly boost the effective enforcement of the equal pay principle.

Despite the long history of European equal pay legislation, not a single country in the European Union has managed to establish equal pay for women and men. Women today are still paid less than their male counterparts and are thus facing perpetuating financial and economic inequalities. The strong reliance on the individual-rights-based enforcement approach has thus done little to secure equal pay in practice and national governments should finally step up their efforts to safeguard the principle of gender equality. The new proposed directive by the European Commission aims to strengthen the application of the equal pay principle through enhanced enforcement mechanisms for Member States and employers, and enhancing pay transparency. Whether or not this will guarantee effective enforcement will largely depend on political and stakeholder saliency as well as the capacity for collective action to address the scope of the problem. In this light, the proposed directive could be further strengthened by enhancing the role of employers, national and EU supervisory bodies and social partners.

A slow start

There will be very few EU legal practitioners not being familiar with the famous Defrenne saga the European Court of Justice (CJEU) faced back in the 1970s.  Ms Defrenne, air hostess with Sabena Airlines, was fired at the age of 40, it being company policy to fire female air hostesses at that age. A dedicated lawyer, Eliane Vogel-Polsky, convinced her to fight against her dismissal and its financial consequences in court. For over a decade they litigated her case, not only before the Belgian courts but also pushing the CJEU to rule three times on the interpretation of article 119 of the EEC Treaty; first, on the concepts of pay and equal work; then the extent to which article 119 could be relied on in court vis-à-vis not only public authorities but also private parties; and then the Court in the last case stressing its social and fundamental rights nature. As such, this hard legal battle stands at the cradle of the whole EU – gender – equality law acquis, as it incited the adoption of the equal pay directive in 1975, followed by much more EU legislation, case law and policymaking in the years after and culminating in provisions in the European treaties and the Charter of Fundamental Rights that recognise gender equality even asa core value that the Member States share and upon which the EU is built.

Mind the gap

It is a sad fact that now being in 2021 – more than 50 years after Defrenne I and 63 years since the entry into force of the EEC Treaty – this proclaimed core value has still not translated into the closure of the gender pay gap in daily practice. Currently, women in the EU earn 14.1% less per hour than their male counterparts. In the Netherlands this percentage rises to 14.7%. There are generally large differences across the EU, with the smallest gender pay gap in Luxembourg, Italy and Romania (5%) and the highest in Austria, Germany, Latvia and Estonia (19%). The difference is even higher when measured on yearly earnings (women earning 36.7% less than men). This is because women work more part-time which leads to a ‘double penalty’. This double penalty stems from the fact that women’s hourly pay is lower than men’s and that women often work more part-time.

Working part-time would explain less monthly earnings – but not fewer hourly earnings.

Level of education or skill also does not provide in itself a valid explanation for hourly pay gaps, since women tend to earn less than men for the same job. The reason for the gender pay gap in the EU is not merely a matter of discrimination. It also involves prevailing gender norms constituting a higher share of women doing unpaid work (at home), sectoral segregation in the labour market, disproportionately low percentages of women in CEO positions, gender differences in bargaining skills, and gender differences in work interruptions.

A distinction needs to be made also between the ‘explained’ (unadjusted) and the ‘unexplained’ (adjusted) pay gap. The explained pay gap takes the different characteristics of women and men into account that lead to unequal pay, and thinks about education level, skill-set, seniority, occupational sector, status and employment preference. These characteristics are nonetheless not free from discrimination. As its name indicates, however, the unexplained pay gap is not able to explain the reasons for a gender pay gap: why does a gap persist in cases of men and women demonstrating similar levels of education, work experience, age, training and so on? In the Netherlands the unexplained pay gap is about 5 to 6%. It is therefore important to determine whether discrimination based on gender occurred in such cases and what justifications there may (or may not) be for such pay differences. It is therefore vital that employers explore the gender pay gap that may exist within their organisation and to address it when no valid explanation can be found for it.

The gender pay gap is foremost an enforcement gap

Comparative research carried out across the EU countries over the past decades consistently points to two major problems that provide explanations for the ineffective tackling of the persisting gender pay gap.

The first one concerns the fact that the enforcement system in EU gender equality law – and national law by consequence – relies predominantly on an individual-rights-based approach, which means that it is the victim of discrimination that needs to go to court to see justice done. There are serious limits to this approach, besides the fact that it only leads to a solution in the case at hand and is not geared towards resolving structural forms of discrimination. The mentioned research reveals that victims of discrimination do not go to court because the law may not be clear to them, they may lack access to relevant information to build a case, and they may be deterred by the length and cost of proceedings, low levels of legal aid and compensation provided, a lack of trust in the judicial system, uncertainty about the outcome of the case and the risk of stigmatization and public victimization. The legal system is thus in fact asking David to stand up against Goliath, which requires much courage and perseverance by claimants. The overall very low level of gender equality litigation across the EU confirms women’s reluctance to go down this road and cases that get to court are only the tip of the iceberg of problems that exist in practice. Clearly, not all women are fighters like Defrenne and Vogel-Polsky, but more importantly so, they should not be forced into that role.

The second problem goes hand-in-hand with the strong focus on the individual-rights-based approach; as unequal pay is primarily seen as a private matter that needs to be tackled by the person affected by it, there is an overall lack of institutional commitment on the part of public authorities, employers and social partners to take the action that is necessary to solve the structural discrimination engrained in the gender pay gap. Little action is taken to enhance knowledge and training, to ensure gender-neutral job classification and evaluation systems, to actively monitor the implementation of the equal pay rule and to provide for effective enforcement mechanisms, including sanctions. Overall, little attention and few resources are dedicated to this.

The lesson to be learnt fromthe past 50 years is that there is a political duty to realise the core value of gender equality upon which our European and national societies are proclaimed to be built, and a realization that we cannot leave this burden merely on the shoulders of victims of discrimination. We must stop seeing the courts as the first port of call for employees to solve their unequal pay problem, but finally shift our focus to those who bear responsibility for the development and application of job classification and wage systems and those who can monitor, control and change such systems: employers, social partners, governments and public supervisory authorities. They can ensure both prevention and combatting of pay discrimination and bring about structural reform. A more comprehensive, collective and pro- and reactive legal approach in enforcement is required that stipulates duties of public authorities and other stakeholders, and employers more generally, to ensure effective implementation and enforcement of the equal pay principle. We have recently conveyed this message in a joint public hearing on the proposed directive, organised by the European Parliament.

Will the Commission’s recent directive proposal address enforcement problems?

The proposal for a directive which the European Commission presented on March 4, 2021 marks key steps in this direction, by focusing both on enhancing transparency and reinforcing enforcement mechanisms so as to strengthen the application of the equal pay principle. In fact, the proposal can be seen as asking the Member States along with employers and social partners to finally put their money where their mouth is and to pursue implementation of that principle in practice.

As such, the proposal not only reinforces the position of victims in court proceedings by providing a more extensive conceptual and procedural toolbox they can rely on, helping to address some of the deficiencies identified above [see articles 6, 7, 12, 14, 16, 17, 18, 19, 22 of the directive proposal], but importantly it also imposes for the first time specific duties on employers to ensure gender neutral wage and job classification systems (art. 4), to engage in a joint pay assessment (art. 9), to report and to disclose pay information, to explain pay differences and – where there is no objective, gender-neutral reason for them – the measures taken to remedy such pay differences (art. 8). This is coupled with the obligation for Member States to design a monitoring bodythat bears responsibility for the effective implementation of these duties and for ensuring that employers live up to them (art. 26). The monitoring body shall inform and cooperate with the national equality body and the labour inspectorate. It should also be adequately resourced for this. Lastly, the national monitoring body is to report annually to the Commission.

The imposition to designate such a body is an essential step forward, yetits role and mandate is less far-reaching than what we see in many other domains (e.g. data protection and financial markets). There EU law not only obliged the establishment of national supervisory bodies, but also of EU supervisory agencies. In this regard, the proposal is silent on the potential – larger – role of the European Institute for Gender Equality in this regard or possibly the European Labour Authority. There are also some other important limitations in the proposal, regarding the scope of application (only to employers with over 250 employees); the evaluation of the Directive’s impact (only after 8 years); as well as in comparison to steps taken in some states as to develop more advanced auditing and certification systems to ensure compliance with the equal pay principle (e.g. in Iceland, Finland, Germany, the UK and Sweden).

A final point of attention concerns the role of the social partners. The social partners play a significant role in the implementation of the equal pay rights and obligations set out in the proposed directive by concluding and enforcing collective agreements in the Member States, while at the same time respecting the national differences in social dialogue. The social partners represent autonomous agents and are tasked with detecting strengths and weaknesses of the implementation of this directive on a national, regional and local level, and establishing gender-neutral job evaluation and classification schemes, thereby harnessing also a minimum level of harmonisation across the EU. Yet, their role is not remarkably improved or strengthened in the new proposed directive, compared to the currently applicable Recast Directive. Instead, the involvement of the social partners is utilised through enhanced pay transparency requirements, bargaining negotiations, the right to take collective action and capacity to develop gender-neutral job classification systems, leaving them still considerable leeway. Nevertheless, to put things into perspective, the role and responsibilities of the social partners have a complementary function to the aforementioned proposed duties of employers and the Member States. The proposed directive here assumes a combined approach based on the implementation of substantive rights and obligations by collective agreements which respects the national differences of bargaining systems and social dialogue.