Pay gap resulting from a lower salary increase in connection with transfer of business (TAS 19/2021, issued on 26 November, 2021)

Resident doctors A and B transferred to hospital district X due to transfer of business. A and B are persons of different genders. B received a salary increase for experience before the transfer based on having worked three years as a licensed physician. The salary increase was based on a local agreement binding on the employer. Hospital district X terminated the agreement in connection with the business transfer. When A reached the milestone of three years as a licensed physician after the business transfer, her salary increase based on the national collective agreement binding on hospital district X was lower than B's salary increase had been. A considered the pay gap to be in violation of the Equality Act.  

The Ombudsman for Equality stated that the case involved examining application of the Act on Equality between Women and Men (Equality Act) in connection with transfer of business. Before the transfer of business, A and B worked for the same employer, meaning that the case did not involve differences in salary between employees transferred from different organisations. However, the different grounds for determining the salary of A and B are related to the change of payroll system in connection with the transfer of business. 

Assumption of pay discrimination

The Ombudsman for Equality found that A had reason to compare her salary to the salary of B, and an assumption of discrimination pursuant to the Equality Act arose in the case. The employer did not deny that A and B were engaged in the same work or work of equal value. The rationale for the provisions on prohibition of pay discrimination in the Equality Act emphasises that an assumption of pay discrimination arises when an employee works for the same employer as an employee of the opposite gender and is engaged in either the same work or work of equal value but is paid less. Efforts were made to clarify this premise in connection with the 2005 law reform, both in the rationale for the Act and by changing the wording concerning the prohibition of pay discrimination. 

According to the rationale for the section on pay survey in the Equality Act, any pay differences between employees of different genders, resulting from factors such as merging of organisations or introduction of a new pay system, may need to be analysed on the basis of the Equality Act. The rationale for the Act states that pay differences may for a special reason lasting a limited time result from merging of organisations, introduction of a new pay system or market factors affecting pay. 

Changes in circumstances as an acceptable reason for a pay difference

Pursuant to the Equality Act, the employer can revoke the assumption of pay discrimination by proving that there is an acceptable reason for the pay difference. It has been found in established legal practice and monitoring practice of the Equality Act that employers have had an acceptable reason for pay differences due to certain changes in circumstances. In such cases, the employers have been liable to harmonise the pay differences within a reasonable time. The section in the rationale for the Equality Act stating that pay differences may result from certain changes in circumstances for a special reason "lasting a limited time" means that pay differences must be harmonised within a reasonable transitional period. The Ombudsman for Equality found that A had the right to have her salary harmonised with B's salary within a period that is deemed reasonable.

Duration of a reasonable transitional period

In assessing the duration of a reasonable transitional period, the requirements set in the Equality Act for determining an acceptable reason must be taken into consideration. The transitional period must be appropriate and necessary in view of its objective. 

Acceptable duration for eliminating pay differences is assessed on a case-by-case basis. In Supreme Court rulings KKO 2013:10 and KKO 2013:11, harmonisation of pay differences took two years, which the Supreme Court found to be an acceptable period. 

In a response to A, hospital district X stated that the plan was to harmonise the pay of employees who had transferred to the hospital district in connection with the business transfer in 2020, which means that the duration of the transitional period would be one year. In the view of the Ombudsman for Equality, the transitional period referred to by the hospital district can in this case be considered an acceptable period for correcting A's salary, unless the hospital district proves otherwise. 

26.01.2022