Transposition of the Pay Transparency Directive’s Requirements in Latvia

2023. In May 2023, European Parliament and Council Directive (EU) 2023/970 on pay transparency (the Directive) was adopted with the aim of ensuring that men and women receive equal pay for equal work or work of equal value.

Although the requirements of the Directive have not yet been transposed into Latvian law – the public consultation on the draft law “Wage Transparency Law” (Draft Law) concluded only in April of this year – the first part of Section 60 of the Labor Law already stipulates the employer’s obligation to establish equal remuneration for men and women for the same work or work of equal value. Furthermore, the second part of the aforementioned section grants employees the right to claim remuneration that an employer typically pays for the same work or work of equal value.

Therefore, in theory, employers should already be prepared for the transposition of the Directive’s requirements, insofar as they relate to the amount of remuneration between men and women. At the same time, the Directive establishes specific mechanisms, the proper implementation of which should ensure the achievement of the Directive’s objective.

Although the Directive is aimed at gender neutrality in remuneration, the mechanisms stemming from it essentially ensure general transparency in remuneration, which promotes the well-being of employees regardless of gender. Thus, the employer’s obligations, which the Draft Law transposes from the Directive, are broader than merely ensuring gender neutrality.

The Draft Law transposes the following employer obligations from the Directive:

1. to develop a remuneration system that ensures equal pay for men and women for equal work and work of equal value;
2. to provide information and ensure access to information on the criteria used to determine employees’ remuneration and pay levels, as well as the criteria used for employees to advance to higher pay levels;
3. the obligation to report on pay differences.

In practice, difficulties may arise in applying the concept of “work of equal value,” which was also highlighted during the public consultation on the Draft Law.

Currently, the Draft Law defines work of equal value as work recognized as equally valuable in accordance with non-discriminatory and objective gender-neutral criteria. While this provides employers with discretion to define the content of “work of equal value” according to their specific activities, it may also create practical difficulties.

A series of employer obligations stem from the correct definition of “work of equal value,” including the duty to provide employees with information on their individual remuneration levels and average remuneration levels, broken down by gender, within categories of employees performing the same work or work of equal value.

The employer must be able to independently identify which categories of employees perform the same work or work of equal value. The Draft Law places the burden of proof on the employer to demonstrate that no direct or indirect discrimination has occurred in the area of remuneration, which requires, among other things, being able to justify which persons perform work of equal value.

During the public consultation, several problematic issues were identified regarding the transposition of the Directive’s requirements into the Draft Law, and, as indicated by the Ministry of Welfare, work is currently underway on possible amendments to the Draft Law.

Regardless of the fact that at this stage of the Draft Law’s development it is not possible to definitively comment on its final version, it can be safely concluded that, alongside the administrative burden placed on employers, the transposition of the Directive’s requirements will significantly increase pay transparency and promote the creation of a fair remuneration system. Although Latvian regulatory framework already provides for the principle of equal pay, the new regulation will set out more detailed requirements regarding the establishment of remuneration systems, access to information, and reporting obligations.

The potential challenge in applying the concept of “work of equal value” indicates the need for employers to timely develop clear, objective, and gender-neutral job evaluation criteria appropriate to their specific activities, while also ensuring the ability to justify remuneration principles and demonstrate the absence of discrimination in the field of remuneration.