Suspected case of pay discrimination in a private company (TAS 300/2018, issued on 11 January 2019)

Man A asked the Ombudsman of Equality to investigate whether he had been discriminated against in a manner that violated the Act on Equality between Women and Men (hereinafter the Equality Act) as his employer had been paying him a lower salary than woman B, who performed the same or equally valuable work. In his request for a statement to the Ombudsman for Equality, A explained that, for example, his total salary was notably lower than B’s, who worked in the same team and had been placed in the same job requirement category.

The provisions in the Equality Act

According to section 8(1)(3) of the Equality Act, the action of an employer shall be deemed to constitute discrimination prohibited under the Equality Act if the employer applies the pay or other terms of employment in such a way that one or more employees find themselves in a less favourable position based on their gender than one or more other employees in the employer’s service performing the same work or work of equal value.

Assessment of the case

When assessing pay discrimination in accordance with the Equality Act, it is necessary to find out whether the employee suspecting pay discrimination and the employee representing the other gender and receiving a higher salary, performed the same work or work of equal value. If the work duties are the same or of equal value, a presumption of gender-based discrimination is raised.

In his request for a statement, A highlighted the fact that both he and B worked in the same team, performed similar tasks and that they had both been placed in the same job requirement category. On the basis of these grounds, A felt that his work was, at minimum, of an equal value than the work performed by B. According to their employer, while both A and B had the same job title, their work duties did not match when it came to their respective scopes, requirements and responsibilities. According to their employer, B had several additional work duties and responsibilities that A did not. In his rebuttal, A presented a dissenting opinion on the responsibility and scope of his work duties and highlighted the factors that he felt proved that his work was as demanding and responsible as B's work.

The Ombudsman for Equality stated that the written reports submitted by both parties contained contradictory opinions on whether the work duties of A and B are the same or of equal value. Due to the contradictions in the reports submitted to the Ombudsman for Equality, the question of whether the work duties of A and B are equally demanding and thus of equal value remains unanswered.

According to the employer, the company’s internal job requirement categories are used to help determine the salary of each employee: as a general rule, the higher a job is ranked on the job requirement scale, the larger the salary that is paid for it. On the other hand, the employer also stated that each salary is agreed on an individual basis and that the job requirement category is not a deciding factor when deciding the salary of an employee. However, A’s salary did not increase when he was promoted to a higher job requirement category. The employer’s report also did not claim that any of the other factors that affected the determination of A’s salary (e.g. his work performance) had diminished when A changed job requirement categories, which could have caused his salary to remain the same. The Ombudsman for Equality noted that the company’s salary system seemed, on the basis of the company's job requirement definitions, personal performance evaluation methods and total salary formation, rather opaque.

EU law requires that all salary systems be open and transparent to safeguard the equal pay principle. To ensure that a salary system complies with this principle of openness, the employees of a company must be aware of the salary-related criteria that apply to them and the importance of the factors that affect the determination of their salary. If a salary system is opaque and the matter is brought before a court in a possible compensation claim case, the burden of proof will rest on the employer and they will be required to prove that their salary system is non-discriminating in nature.

Even if an employer applies their salary terms in a way that places an employee in a less favourable position on the basis of their gender than another employee doing the same level of work for the same employer, this may not necessarily constitute discrimination. The employer will not be considered to have violated the prohibition against discrimination if they can prove that there is an acceptable reason for the difference in the amount of salary that is paid. According to the preliminary work on the Equality Act, these types of acceptable reasons for salary-related differences include such factors as a person's education, professional skills, initiative and suitability for more demanding duties.

The employer justified the differences in A’s and B’s salaries by referring to the company’s financial resources and to the differences in the amount of work experience each employee had as well as their levels of performance. The Ombudsman for Equality stated that if, on the basis of a salary comparison done in accordance with the Equality Act, the compared job descriptions are deemed to be of an equally demanding nature, the employer cannot reasonably justify the other employee’s lower salary on the basis of inadequate financial resources. The amount of work experience that an employee has and their work performance can constitute acceptable reasons for paying a different salary to employees who perform work that is of equal value. In such cases, the employer must be able to demonstrate the existence of such differences between their employees when specifying these factors as the basis for the salary differences. The Ombudsman for Equality emphasised that the employer’s reports did not clearly indicate the effect that the employees’ work experience and work performance had on their respective salaries and that the employer’s salary system remained fairly opaque when it came to these factors. Due to these factors, if the matter is taken to court, the employer would be subject to an elevated burden of proof to demonstrate the effect that the highlighted factors had on the salary of the employer’s employees.