Prohibition of discrimination on grounds of parenthood in the award of employment benefits (TAS/667/2023 of 9 July 2024)

Question to assess 

Parent A, who did not give birth to their child, has taken parental leave of about nine months shortly after the end of the company's financial year 2022. A has not been granted RSUs (Restricted Stock Units) for the financial year in question, even though he considers that he has met the conditions. 

This case was assessed under discrimination law as to whether there was a presumption of discrimination and whether it was sufficiently likely that A would have obtained the employment benefit in question if he had not exercised his right to family leave. In addition, it was assessed whether the prohibition of discrimination under section 8, subsection 1, paragraph 2 of the Equality Act applied in the case. 

On the application of the prohibition of discrimination in the Equality Act 

The Equality Act defines discrimination on the grounds of parenthood and family responsibilities as independent forms of discrimination. An employer's conduct shall be considered prohibited discrimination if, when deciding on pay or other terms and conditions of employment, the employer acts in such a way that the person is placed at a disadvantage on the grounds of pregnancy, childbirth or other gender-related grounds, including parenthood and family responsibilities, including the use of family leave (section 8, subsection 1, paragraph 2, HE 195/2004 vp.) 

The prohibition of discrimination in the Equality Act obliges companies operating in Finland to comply with this mandatory legal provision, and provides protection for all employees working in Finland. Person A must be entitled to the legal protection provided by the Equality Act in a subsidiary company belonging to an international group that acts as A's employer in Finland. 

A's employer has argued that RSUs are seen as a long-term incentive that is not part of an employee's remuneration package, but rather a tool designed to invest in employees whom the employer expects to perform well in the future.

The prohibition of pay discrimination has been defined in settled case-law in a broad sense, covering all benefits in cash or in kind, whether immediate or future, which are paid, even indirectly, by an employer to an employee in return for work done (ECJ cases 80/70 Defrenne; C-262/88 Barber). It is not sufficient to consider the remuneration paid to workers only in the aggregate (C-381/99 Brunnhofer). The prohibition of pay discrimination in the Equality Act thus applies to this benefit. 

Assessing the prohibition of discrimination through self-comparison

The burden of proving that the practice is not discriminatory shifts to the employer once the person alleged to have been discriminated against has shown that they have been disadvantaged and there has been discrimination in relation to pregnancy, childbirth, parenthood and family care responsibilities. In addition, the employee must prove that the employer knew of the pregnancy or family care responsibilities (HD 63/1992).

When assessing potential disadvantage due to the use of family leave, so-called self-comparison can be used: To give rise to a presumption of discrimination, the employee must show with a sufficient degree of probability that they would have been treated differently had they not taken family leave. Self-comparison uses as a benchmark a hypothetical situation in which the employee did not use family leave, and assesses whether it is likely that they would have been treated differently in such a case. (HE 195/2004, p. 39, KKO 2017:25.)

The employer has known about A's upcoming parental leave. A has also been found to have met the formal criteria for RSU eligibility. In addition, it is known that for other members of A's team were granted this benefit in the year in question. Two of them were not included in the employers "original budget" because of the date when their employment began. A has stated in his communications that he has received commendable feedback throughout the financial year on the basis of his "influence, working methods and future potential”. The employer has stated that these factors determine entitlement to this benefit.

The Ombudsman for Equality considers that there is a presumption that A has been treated unfavourably because he has used his family leave. The employer thus has the burden of proving that its policy in granting RSUs was not discriminatory, and that it had non-discriminatory grounds for its conduct as recognised by the Equality Act.

The issue was whether the superiors of A who represented the employer objectively had reasonable grounds for excluding A from the benefit in question, based on an actual assessment of A's performance, or whether, on the contrary, it was shown to be sufficiently likely that A would not have been nominated for the benefit in question anyway, even if he had not taken family leave.

Employer’s burden of proof in an opaque bonus system

According to A's employer, the criteria for awarding the employment benefit being assessed are defined at a general level to ensure that the employer can ultimately decide how to assess these criteria for each employee. 

The Ombudsman for Equality stresses that, even if the remuneration criteria used by the employer are flexible, they must not be discriminatory in any way. In cases of suspected discrimination, the employer must be able to justify its decision in sufficient detail and objectively.

The lack of transparency in the remuneration system shifts the burden of proof of non-discrimination in remuneration to the employer. The employer must show that its pay practices are not discriminatory. Transparency applies to all components of pay (HE 195/2004 vp 39; C-109/88 Danfoss; C-127/92 Enderby). 

In the case under review, the parties have provided ample proof of A’s "contribution, working methods and future potential". On the other hand, the reasons put forward by the employer for excluding A from the employment benefit seem to partly change during the settlement process This contributes to the impression of opacity and adds to the challenge of proving that employee assessment has been carried out objectively.

On the basis of all the evidence in the case, the Ombudsman for Equality considers it likely that A has been unfairly disadvantaged because of his use of family leave. The employer has been unable to provide evidence of A's performance in the case as a whole that might contradict the presumption of discrimination that has arisen in the case. This has been due in particular to the partial opacity of the system, and to the fact that the reasons for not rewarding A changed during the process. 

When there is insufficient evidence to contradict the presumption of discrimination, the presumption of discrimination remains. The employee must be deemed to have acted in a manner contrary to section 8, subsection 1, paragraph 2 of the Equality Act. A who has been a victim of discrimination is therefore entitled to compensation for breach of the prohibition of discrimination under section 11 of the Equality Act. 

12.09.2024