EU Directive 2023/970: employer obligations and risks in pay transparency

This is reflected in:

• The right of job applicants to request and obtain from the prospective employer information regarding the starting salary or the salary range. And where applicable, the right of the job applicant to request and obtain from the potential employer the relevant provisions of any collective agreement applied by the employer.
• The corresponding obligation of the potential employer to provide information regarding the level of remuneration as early as the recruitment stage, either directly in job postings or prior to salary negotiations.
• The obligation of the potential employer not to request information from candidates regarding their current remuneration level or their salary history.

Thus, the directive prohibits employers from asking job applicants for information regarding their salary history during their current or previous employment relationships, thereby protecting the freedom to negotiate.

Although there is no express provision requiring employers not to ask prospective employees for information regarding their salary history, this obligation can currently be inferred from the provisions of article 29, paragraphs (3) and (4) of the Labour Code, which limit the information an employer may request from a job applicant exclusively to that pertaining to professional skills and prior work experience:

“(3) The purpose of the information requested, under any form, by the employer from the person applying for a job on the occasion of the preliminary check of abilities can only be for assessing his/her capacity to be in that position, as well as his/her professional abilities.

(4) The employer can request information about the person applying for a job from his/her former employers, but only as regards the duties carried out and the length of that employment and provided the person in question has been informed in advance.”

1. Internal transparency regarding pay levels - employees’ right to be informed.

The Directive establishes the right of employees to be informed about their own pay levels and the average pay levels, broken down by gender, for categories of employees performing the same work or work of equal value, with the aim of enabling employees to assess the fairness of how pay levels are determined.

Specific mechanisms have been established to ensure the effective exercise of this right.

Specifically, an employee’s right to information regarding their own salary, the average salary for equivalent positions (broken down by gender), and the criteria used to determine and adjust compensation may be exercised (i) either directly by the employee, (ii) through employee representatives, or (iii) through an equality body.

In conjunction with this right, employers will be required to inform all employees annually of their right to request relevant information regarding their pay, and to respond within a reasonable timeframe, which may not exceed two months, in accordance with the provisions of the Directive.

Similarly, employers will be required to inform employees annually about the criteria used to determine compensation, compensation levels, and compensation trends.

Employers with fewer than 50 employees may be exempt from the obligation to inform employees about changes in their pay; this matter is left to the discretion of the Member States.

Practically, under the Directive, employers are required to establish a gender-neutral pay system based on objective and neutral criteria, such as skills, effort, responsibility, and working conditions, and, where applicable, any other factors relevant to the specific job or position.

Wage transparency in employment relationships will include the employee’s right to disclose their compensation in order to ensure the application of the principle of equal pay, with the exercise of this right limited exclusively to the purpose of exercising their right to equal pay.

The directive, however, prohibits employers from including clauses in individual employment contracts that are intended to restrict an employee’s right to disclose information about their own pay.

We note the significant impact on the traditional legal framework governing wage confidentiality, transforming wages from purely private information into almost a public matter, with the aim of combating discrimination.

In Romania, according to Article 163(1) of the Labour Code⁵, salary information is confidential, and the employer is required to take the necessary measures to ensure confidentiality.

And considering the new Directive on pay transparency, the principle of pay confidentiality remains an obligation for both the employee and the employer. Exceptionally, in order to promote the interests and defend the rights of employees, pay confidentiality cannot be invoked against trade unions or, where applicable, employee representatives, strictly in connection with their interests and in their direct relationship with the employer.

In this legal context, the Directive marks a paradigm shift, addressing the relationship between the right to privacy and the need to ensure equal pay for women and men.

It is important to note that the protection afforded to employees under the Directive applies only when the disclosure of one’s own salary serves a legitimate purpose, namely, to verify compliance with the principle of equal pay.

According to the Directive, discussions regarding salary levels are permitted among employees who hold similar positions or perform work of equal value, in order to identify any unjustified differences. Outside of this context, the disclosure of other colleagues’ salaries is not protected under the Directive.

At the employee’s request, the employer will be required to disclose the employee’s own salary and anonymous statistical data on average pay levels for comparable positions, broken down by gender. The individual salaries of other employees remain confidential, and unauthorised disclosure is subject to penalties under data protection laws.

Essentially, the Directive calls for a redefinition of fairness in labour relations: confidentiality is not eliminated, but must be balanced against the need for transparency, through anonymised data and statistics that demonstrate equal treatment. Pay transparency does not automatically correct disparities but tests the internal consistency of employers: if remuneration is based on clear and objective criteria, the Directive confirms its soundness; if there are unjustified or poorly documented decisions, legal pressure will be unavoidable.

In short, the goal is not to disclose salaries, but to move from compensation that is hidden behind confidentiality to compensation that is safeguarded by fairness, transparency, and the ability to justify decisions when they are reviewed or challenged.

2. The employer should define, as clearly as possible, what constitutes as equal work or work of equal value. Clear compensation structures should be implemented, based on neutral and objective criteria.

The European directive requires employers to define work of equal value. Clarifying this concept will involve many practical difficulties, particularly regarding interpretation.

Article 4 of the Directive provides that, in order to determine whether employees are in a comparable situation regarding the value of their work, objective, gender-neutral criteria shall be taken into account, established in consultation with employee representatives where such representatives exist.

According to the Directive, such criteria include skills, effort, responsibility and working conditions and, where applicable, any other factors relevant to the specific position or job.

These criteria are applied objectively and in a gender-neutral manner, excluding any direct or indirect discrimination based on gender. In particular, relevant non-technical skills must not be undervalued.

To determine whether male or female employees perform the same work, the Directive established two key rules in Article 19, namely:

• The assessment will not be limited to situations where female and male employees work for the same employer, but will extend to a single source that determines the terms of remuneration (for example, the situation of corporate groups where the terms of remuneration are decided at the group level for all employees working in the group’s companies).

Article 19(1) of the Directive states that: „A single source shall exist where it stipulates the elements of pay relevant for the comparison of workers.”

In other words, when assessing whether employees perform the same work or work of equal value, the comparison of wages will extend not only to employees of the same employer, but also to those paid by a common source that sets the terms of remuneration. This rule is rooted in the case law of the Court of Justice of the European Union, as established in cases C-320/00 A.G. Lawrence and Others v Regent Office Care Ltd⁶ and C-624/19 – K. and Others v Tesco Stores Ltd⁷, which confirms that equal pay applies even if employees work for different employers, but their remuneration depends on a single source (e.g., in the case of a parent company).

This principle will have significant implications for multinational companies, where pay conditions may be set centrally, but employees work in different entities.

Since the Directive does not require equal nominal wages across countries, pay differences could be justified by objective factors such as the cost of living, the dynamics of the local labour market, or the economic level of each country.

However, in situations where compensation decisions (salary levels, bonuses, variable components, pay raises, etc.) are determined centrally, at the group level and across countries, it is necessary to assess the extent to which the system ensures fairness for positions of equal value.

In other words, the “equal pay for work of equal value” analysis may extend beyond the entity if there is a common source that determines remuneration.

• The assessment will not be limited to employees hired at the same time as the employee in question. We consider that the provision in the European Directive does not refer to “assessment” in a methodological sense, but rather to the possibility of comparing pay when analysing whether there is equal work or work of equal value. For this reason, the use of the term “assessment” may create confusion. In other words, the comparison used to determine whether there is equal work or work of equal value will not be limited solely to employees currently in an employment relationship, but may also include former employees who held comparable positions, in the context of analysing a potential situation of wage discrimination.

Authorities are required to provide employees with tools or guidelines designed to support the process of evaluating and comparing the value of work, without precluding employees from using internal methodologies or internationally recognised evaluation systems that comply with the principles of fairness.

It is expected that, following the transposition of the Directive into national law, the competent authorities will develop guidelines or methodologies designed to facilitate the clearest possible determination of work of equal value.

Determining work of equal value can be more complex in sectors characterised by highly specialised roles or flexible organisational structures (e.g., IT, consulting, advertising, design, media, or research), where a direct comparison of responsibilities and contributions across roles may require more detailed evaluation methodologies.

Employers may face challenges in evaluating and comparing the value of work when compensation systems are not designed or implemented based on clearly defined and consistent criteria. In such situations, comparing roles that involve different or highly specialised responsibilities can become more difficult, especially if the job evaluation methodology or the criteria used are not sufficiently well-documented or applied consistently.

We believe that, in order to avoid potential misinterpretations, the assessment of work of equal value should be based on the specific duties of the position and on objective evaluation criteria, such as level of experience, responsibilities, working conditions, and the effort required to perform specific tasks.

To overcome these challenges, it is important for companies to develop or use transparent, standardised and well-documented job evaluation methodologies, including analytical or internationally recognised methodologies, that are aligned with the criteria set forth in the Directive and to ensure that those responsible for administering the compensation system are trained in the proper application of the evaluation criteria.

A key provision in domestic law regarding the assessment of work of equal value is found in Article 4(f) of Law No. 202/2002 on equal opportunities and treatment between women and men, as republished which states: “work of equal value means paid work which, upon comparison, based on the same indicators and the same units of measurement, with another activity, reflects the use of similar or equal professional knowledge and skills, and the exertion of an equal or similar amount of intellectual and/or physical effort.”

3. External transparency regarding pay levels – a phased reporting requirement for information on the gender pay gap, depending on the size of the company. Possible remedies – Articles 9 and 10 of the Directive

The reporting of information on gender-based pay within a company will take place after the employer’s management has confirmed its accuracy, following consultation with employee representatives.

This information will be provided to the authority responsible for collecting this data.

The frequency of reporting depends on the number of employees at the employer’s company as follows:

• Employers with at least 250 employees are required to report pay gaps annually. For the year 2026, the reporting requirement must be fulfilled by 7 June 2027 and thereafter each year for the preceding calendar year.
• Employers with 150–249 employees are required to file a report by 7 June 2027 and thereafter, once every three years, for the preceding calendar year.
• Employers with 100–149 employees are required to file a report by 7 June 2031 and thereafter, once every three years, for the preceding calendar year.

As for companies with fewer than 100 employees, the Directive gives Member States flexibility in its implementation, leaving it up to them to decide whether to require these employers to provide information on pay.

The Directive states that, to the extent that pay differences between women and men are not justified on the basis of objective, gender-neutral criteria, employers will be required to remedy the situation within a reasonable period of time, in close cooperation with employee representatives, the labour inspectorate, and/or the equality body (in Romania’s case, the National Agency for Equal Opportunities between Women and Men or the National Council for Combating Discrimination).

Even if companies below the reporting threshold are not required to periodically submit this information to the authorities, it is advisable for them to monitor the relevant remuneration indicators internally. This becomes important in the context of employees’ right to request information on average remuneration levels for work of equal value, broken down by gender, to the extent that confidentiality requirements can be met and there are a sufficient number of comparable positions.

The rule of 5%: in addition to the obligation to report information regarding pay gaps, employers subject to this reporting requirement are also required to conduct a joint pay assessment if all of the following conditions are met:

• A pay gap of at least 5% between the average pay of female and male employees;
• Failure to justify these differences on the basis of objective and gender-neutral criteria;
• The employer’s failure to solve this unjustified disparity in average pay within 6 months of the submission of the report.

Therefore, if the pay gap between women and men exceeds 5% and cannot be objectively justified, employers will be required to initiate a joint assessment with employee representatives to address the situation and develop an action plan within six months.

Consequently, with regard to reporting obligations, the Pay Transparency Directive affects companies differently depending on their size.

Large companies should invest in human resources systems, salary analysis, and internal auditing, while for small and medium-sized enterprises, the challenges may stem primarily from limited resources and a reduced administrative capacity to manage the requirements of the directive.

The information referred to in Article 9(1) of the Directive must be communicated to the authority responsible for compiling and publishing such data; accordingly, each Member State must designate a body to monitor and support the implementation of the Directive.

The monitoring body may be part of an existing body or structure at the national level. Member States may also designate more than one body for the purposes of raising awareness and collecting data, provided that the functions of monitoring and analysis are carried out by a central body.

The bodies designated to receive these reports should modernise their IT infrastructure to handle large volumes of data and ensure the security and confidentiality of the information.

In fulfilling their obligations to inform employees about pay levels and to report to the competent authority, employers are also required to ensure that the confidentiality of personal data is not compromised.

It is therefore essential that the communication and reporting process ensure compliance with personal data protection legislation (the GDPR and Law No. 190/2018 on measures for the implementation of the GDPR)⁸.

Regarding pay transparency and data protection, employers must transmit pay information securely, anonymise or aggregate the data being compared, and restrict access to this information.

In other words, for categories of employees who perform the same work or work of equal value, statistical and anonymous data will be disclosed.

Therefore, companies are required not to disclose personal data and to limit its use exclusively to the application of the principle of equal pay.

A notable feature of the Directive is that it also raises the possibility for Member States to adopt regulations requiring contracting authorities to introduce penalties and termination conditions that ensure compliance with the principle of equal pay in the performance of public procurement contracts and concessions.

Thus, with reference to Article 24(2) of the Directive, it is left to the discretion of Member States to adopt regulations designed to allow contracting authorities to exclude, or to be required by Member States to exclude, an economic operator from participating in a public procurement procedure where they can demonstrate by any appropriate means a breach of the principle of equal pay, related either to a failure to comply with obligations regarding wage transparency or to a pay gap of more than 5% within any category of employees that is not justified by the employer on the basis of objective, gender-neutral criteria.

From this perspective, there is keen interest in the law transposing the directive to see to what extent Romania will make use of this possibility.

4. What penalties do employers face under Directive 2023/970?

In our view, the main risk employers face if they fail to comply with the provisions of the Directive is that they may be accused of violating the right to equal pay for work of equal value − in other words, wage discrimination.

To ensure the effectiveness of the mechanisms established to promote pay transparency and guarantee compliance with the principle of equal pay regardless of gender, the Directive proposes a series of mechanisms that employees can use to protect their right to equal pay, while leaving it to the Member States to define the specific framework for their implementation.

The Directive promotes the introduction of effective, proportionate, and dissuasive penalties for violations of national provisions adopted pursuant to the Directive, with the aim of discouraging any practices that violate obligations regarding pay transparency and compliance with the principle of equal pay.

The text of the Directive does not prescribe a specific type or level of penalty, but leaves it up to each Member State to decide how to apply them, taking into account the seriousness of the infringement and the national context.

Thus, the Directive refers to the possibility of introducing:

a) Administrative penalties in the form of fines, leaving it to the discretion of Member States to determine the infringements of the rights and obligations relating to equal pay for equal work or for work of equal value, for which fines constitute the most appropriate penalty.

The penalties imposed on employers could be significant, given that fines for discrimination, as provided for in Government Ordinance No. 137/2000 on the prevention and punishment of all forms of discrimination⁹, can reach up to 200,000 lei, which underscores the importance of complying with regulations on pay equity and transparency.

b) Establishing procedures that are as user-friendly as possible for employees, enabling them to have the employer’s compliance with the principle of equal pay reviewed for legality.

Therefore, with the implementation of the Pay Transparency Directive, employers in Romania will need to be mindful not only of but also to the risk of litigation. Failure to properly apply transparency and pay equity obligations may lead to individual complaints from employees, including civil lawsuits for discrimination or requests to remedy unjustified pay gaps.

According to Chapter III of the directive, the procedural mechanism outlined by the European legislator consists of:

A. Introduction of a preliminary conciliation procedure – the Directive leaves it to the discretion of Member States whether to introduce this procedure. It remains to be seen to what extent this conciliation procedure will be (i) mandatory, preceding recourse to judicial proceedings, or (ii) optional, and which body will be appropriate to conduct such a procedure.

B. Judicial proceedings – it remains to be seen to what extent judicial proceedings will be initiated after the preliminary administrative procedure has been completed, and whether the employee will be able to bring the matter directly before the court.

The Directive provides a number of procedural clarifications:

(i) Who can initiate those procedures

Proceedings to enforce the right to equal pay may be initiated (i) by the employee, (ii) as well as by any other competent body responsible for ensuring compliance with the principle of equal pay (associations, organisations, equality bodies, employee representatives, or other legal entities).

(ii) When such proceedings might be initiated

Such actions may be initiated both during the course of the employment relationship and after the termination of the employment relationship in which the discrimination is alleged to have occurred.

(iii) The subject matter of a potential lawsuit

The Directive promotes the principle of full compensation for harm caused to the employee, in accordance with European case law¹⁰.

Consequently, the employee may file a lawsuit to claim, with retroactive effect, the difference in fixed and variable compensation, as well as unrealised benefits, any other damages, and late payment penalties.

In addition, the employer may be required to cease the violation of the right to equal pay and to take effective and concrete measures to ensure compliance with the rights and obligations related to the principle of equal pay, subject to the payment of liquidated damages for delay.

Our recommendation is that, in the event of disputes regarding compensation, employers should be prepared and able to demonstrate transparency and fairness in the decisions they make.

(iv) Issues related to the protection of employees and their representatives when exercising their rights regarding equal pay

• Issues related to legal costs

To facilitate employees’ access to the judicial process, the Directive provides that an employee who brings a legal action alleging discrimination regarding pay, and whose claim is dismissed, cannot be required to pay court costs. The provision in the Directive appears to ignore the scope of such a dispute, the resources allocated to its management, the complexity of the evidence it will entail, and its duration.

With the same aim of facilitating access to legal proceedings, we expect such actions to be exempt from court filing fees.

This therefore points to the prospect of complex, protracted legal disputes that will entail significant costs for employers, which they will not be able to recover from their employees.

De lege ferenda, in order to discourage the filing of such lawsuits for purposes other than those intended by the law, it would be appropriate, at least in cases where it is proven that the lawsuit was filed in bad faith, for the legislature to require the plaintiff whose claims are dismissed, to bear the costs of the proceedings.

• Prohibition of victimisation

In Article 25, the Directive prohibits the victimisation of employees and their representatives on the grounds that they have exercised their rights regarding equal pay or that they have supported another person in an effort to protect that person’s rights.

(v) Statute of limitations

The Directive establishes common standards regarding the statute of limitations, in line with the case law of the European Court of Justice: (i) the statute of limitations periods shall be at least 3 years, and (ii) national legislation must specify when these periods begin to run, their duration, and the circumstances under which they may be suspended or interrupted.

(vi) Burden of proof

The Directive appears to completely reverse the burden of proof, placing it on the employer.

According to the Directive, if the employee bringing the claim presents facts that give rise to a presumption of direct or indirect discrimination, the defendant bears the burden of proving that there was no direct or indirect discrimination in relation to pay.

Given the general wording of the Directive, it will be interesting to see in practice how the presumption of direct or indirect discrimination will operate and on what facts this presumption may be based.

In practice, disputes arising from non-compliance with the principle of equal pay for equal work will follow the classic pattern of labour disputes, in which the burden of proof rests with the employer.

However, the Directive also stipulates that the burden of proof will not fall on the employer if the employer can demonstrate that the breach of the obligations set forth in Articles 5, 6, 7, 9, and 10 was clearly unintentional and of a minor nature. This exception will also present challenges regarding interpretation and application.

National law already stipulates that the burden of proof lies with the employer in cases of alleged direct or indirect discrimination:

• in Ordinance No. 137/2000 on the prevention and sanctioning of forms of discrimination, as republished, in Article 27(4)

“(4) The interested person has the obligation to prove the existence of facts from which it may be presumed that there has been direct or indirect discrimination and it shall be for the respondent to prove that the facts do not constitute discrimination. In front of the Court of Law, any proof can be pleaded, including the video and audio evidence or statistical data.”

• in Law No. 202/2002, Article 35(1), regarding equal opportunities and treatment between women and men, as republished

“(1) The burden of proof lies with the person against whom the complaint or, as the case may be, the summons has been filed, regarding facts that give rise to a presumption of direct or indirect discrimination; that person must prove that the principle of equal treatment between women and men has not been violated.”

In light of these considerations, to the extent that employers review and update their internal compensation policies and performance evaluation mechanisms so that they are based on objective and gender-neutral criteria, the risk of potential wage discrimination disputes will be significantly reduced. In the same context, the odds of dismissing any potential lawsuit that an employee might file will be in the employer’s favour.

5. Conclusions. The Directive’s Impact on the Labour Market

The impact of Directive (EU) 2023/970 on the Romanian labour market will be complex and will manifest itself on multiple levels − economic, social, legislative, and organisational.

Although the adaptation process requires considerable effort and may pose significant challenges for employers, the implementation of the Directive has the potential to ultimately produce a beneficial effect, contributing to the consolidation of a more transparent and equitable labour market, in accordance with European principles.

At the same time, although Romania has not yet published the final form of the law, the legitimate expectation is that national legislation will combine the requirements of Directive (EU) 2023/970 with domestic priorities.

By analysing the experience of other countries (Belgium, Finland, Ireland, Sweden, the Netherlands, Lithuania, and Poland) that have begun to incorporate the Pay Transparency Directive into their domestic legislation, Romania can develop a balanced framework that strengthens employee confidence, provides companies with clear guidance for compliance, and improves the country’s image regarding fair and transparent labour practices.

In conclusion, pay transparency not only ensures a fair and responsible work environment but also helps eliminate unjustified pay gaps between employees and unconscious biases, thereby upholding the principles of social justice, equity, and inclusion, in line with ESG standards.