Equal pay for equal work – upcoming legal changes and challenges for the employers

Equal pay for equal work – upcoming legal changes and challenges for the employers

The European union is steadily progressing towards its goal of “A Union of Equality: Gender Equality Strategy (2020-2025)”. In this context, the Women on Boards Directive was adopted a few of months ago (check out our alert on this topic here).

In May the Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023 on the implementation of the principle of equal pay for equal work or work of equal value for men and women through pay transparency and enforcement mechanisms (the “Equal Pay Directive”or the “Directive”) was formally published.

While the focus of the Women on Boards Directive was to ensure equal opportunities for men and women in management, the main objective of the Equal Pay Directive is the principle of payment. This legislative initiative is not a precedent for the European Union, but it is the first to introduce mechanisms to ensure that the objectives are actually achieved. In addition, the scope of application of the Equal Pay Directive is extremely broad and and will affect employers in both the public and private sectors. Its provisions cover all employees engaged in paid work.

The objectives to be achieved through the transposition of the Equal Pay Directive are not unknown for Bulgarian labour law. Its basic principle – equal pay for equal work, regardless of the employee’s sex has existed in the Labour Code since 2001. Two years later this principle became fundamental in the regulation of the Protection against Discrimination Act, and a consistent case law on this matter was established.

Therefore, the general provisions adopted in the Equal Pay Directive are familiar to the Bulgarian employer. However, some new, non-existent mechanisms are envisaged, which will build on the legal protection of employees working in Bulgaria.

As a first point, job applicants are also included in the scope of the Equal Pay Directive. Currently, disclosure of information on pay levels is an emerging practice in the Bulgarian labour market, whereas the job advertisements indicating specific amounts are rather exceptional. Following the transposition of the Equal Pay Directive, information on the remuneration offered will have to be included in the job advertisement before the interview. The idea is to ensure transparency in pay negotiations, whereas the job applicants shall have the right to receive accurate and comprehensive information on the initial pay or its range. At the same time, employers will not be allowed to ask job applicants for information on current or previous salaries.

Moreover, the employers will need to have objective and gender-neutral criteria for setting pay levels and pay increases. This obligation already exists for Bulgarian employers, and these criteria and rules are regulated in the internal wage rules binding on each company. Following the recent amendments to the Labour Code, employers are now also obliged to make these internal rules accessible for the employees. However, many employers currently take a formal approach by not actually providing adequate information. The transparency obligation will be strengthened accordingly in order to guarantee the right to information that the Equal Pay Directive introduces.

A significant innovation here is the decision to allow employees to freely disclose the amount of their remuneration. In this respect, any contractual clauses that restrict this possibility will be completely prohibited. This legislative decision is certain to cause considerable discontent in the Bulgarian labour market, as the amount of salary is almost always included in the definition of confidential information and trade secrets of employers. After the transposition of the Equal Pay Directive in Bulgaria any restrictive employees clauses, if they continue to exist formally, will have legal effect.

In addition to the above, the Equal Pay Directive envisages a periodic reporting by the employer to the relevant national authority, which will be obliged to monitor the compliance with transparency measures. The competent authority in Bulgaria will be officially determined after the transposition of the Directive and is most likely to be the General Labour Inspectorate. The frequency of reporting will be between one and three years, depending on the number of employees of the employer concerned. If the data submitted reveals a pay gap of more than 5% that cannot be justified by objective and gender-neutral criteria, employers will have to carry out a joint pay assessment with employee representatives.

The Equal Pay Directive provides also the right of claim for employees for compensation for any damages caused to them as a result of breaches of the pay rules. Those damages cannot be limited to a maximum amount, in so far as the persons concerned will have to be compensated for the losses they have actually suffered as a result of the employer’s unlawful conduct. As in all discrimination claims, the burden of proof is on the employer to convince the court that the principle of equal treatment has not been infringed in relation to the employee concerned. A separate provision provides for the imposition of financial penalties on employers who breach the principle of equal pay.

The member states are obliged to transpose the Directive by 07.06.2026. Until the adoption of the relevant legislative changes in Bulgaria, the current arrangements for equal pay for equal work performed by men and women under the Labour Code and the Protection against Discrimination Act will continue to apply.

The present article is for informational purposes only and does not constitute legal advice.

For further information contact:

Mileslava Bogdanova – Misheva, Senior Associate

Boryana Dzhupanova, Associate