[LABOR LAW] Equal Pay for Men and Women: Steps to Take in 2019

Gender equality in the workplace has been declared a “major national cause” for the President of the Republic’s five-year term.

Under Law No. 2018-771 of September 5, 2018, on the freedom to choose one’s professional future, eliminating pay gaps is a performance-based obligation⁽¹⁾ for companies with more than 50 employees.

The measures that companies must take to eliminate pay gaps are specified in Decree No. 2019-15 of January 8, 2019, which took effect retroactively on January 1, 2019.

All companies with more than 50 employees must:

1. develop an equality index to measure pay disparities between men and women using 4 or 5 indicators,
2. assign a score from 0 to 100 to the indicators based on the regulatory scale,
3. submit to the CSE and the DIRECCTE⁽²⁾ the equality index and publish the score obtained online,
4. If the score is less than 75/100, take corrective measures to bring the score up to 75 points or higher.

When should the first edition of the Equality Index report be published?

The equality index score must be published online:

• by March 1, 2019, by companies with at least 1,000 employees,
• by September 1, 2019, by companies with more than 250 employees and fewer than 1,000 employees,
• by March 1, 2020, by companies with 50 to 250 employees.

What are the applicable indicators and scales?

For companies with more than 250 employees, the five indicators are:

1. the gender pay gap, rated from 0 points (for a gap greater than 20%) to 40 points (for a gap of 0%),
2. the difference in individual pay increase rates—excluding promotions—between men and women, ranging from 0 points (for a result greater than 10 percentage points) to 20 points (for a result of 2 percentage points or less),
3. the gap in promotion rates between men and women, ranging from 0 points (for a result greater than 10 percentage points) to 15 points (for a result of 2 percentage points or less),
4. the percentage of female employees who received a pay raise in the year following their return from maternity leave; if pay raises occurred during the maternity leave period, score 0 points (for a result below 100%) or 15 points (for a result equal to 100%),
5. the number of employees of the underrepresented gender among the ten highest-paid employees, scored as 0 points (for 0 or 1 employee), 5 points (for 2 or 3 employees), or 10 points (for 4 or 5 employees).

For companies with 250 or fewer employees, indicator No. 3 is not taken into account, and indicator No. 2 is scored on a scale of 0 to 35 points.

How should the indicators be evaluated?

The methodology is specified in the decree.

What is the deadline for implementing corrective measures⁽³⁾?

If a company does not reach the threshold of 75 out of 100, it has three years from the publication of the Equality Index score to achieve the minimum score of 75/100.

In certain cases, the Direccte may grant an additional one-year extension.

Are there any penalties?

Companies that fail to achieve a score of 75 points by the aforementioned deadlines will be subject to a financial penalty of up to 1% of their total payroll.

According to the Ministry of Labor, the labor inspectorate will conduct 7,000 inspections each year to ensure workplace equality.

What’s the takeaway?

The new regulations require companies to achieve concrete and rapid results in the area of pay equity between women and men.

The government is relying on transparency in companies’ pay policies (online publication of the equality index report) to achieve the goal of workplace equality.

Isabelle Le Coq, Andrea Linne, and Noémi Schwab

⁽¹⁾ Since this is an obligation of result, companies cannot simply make their best efforts to achieve the goal of eliminating pay gaps. They are required to achieve that goal.

⁽²⁾ The Social and Economic Committee (CSE) is the new employee representative body. It replaces employee representatives in companies with at least 11 employees and the three bodies (employee representatives, the works council, and the health, safety, and working conditions committee) in companies with at least 50 employees.

The Regional Directorate for Enterprises, Competition, Consumer Affairs, Labor, and Employment (DIRECCTE) is the decentralized government agency responsible for ensuring compliance with labor law.

⁽³⁾ Based on the results of these indicators, the company will be able to plan for the allocation of a budget as part of the Mandatory Annual Negotiations and/or an adjustment to its hiring and career management policies.

Corrective measures may be specified in the agreement or action plan on gender equality in the workplace, which is mandatory for companies with 50 or more employees (Article L. 2242-9 of the Labor Code).