Empowering equality: Brazil's journey towards gender pay transparency

This article, co-authored by Leila Pigozzi Alves and Ana Carolina Silva of MSI's Brazil law member firm DDSA - De Luca, Derenusson, Schuttoff & Advogado explores the implementation of a new law that was introduced in Brazil aimed at enforcing equal value for the work of men and women.

Law no. 14,611/2023 was sanctioned in July 2023, to address the enforcement of the principle of equal value for the work of men and women. The so-called “Salary Equalization” Law was later regulated by Decree no. 11,795/2023 and by Ordinance 3,717/2023 of the Ministry of Labor.

Purpose to Enforce Equal Valuing of Work Through Transparency 

A careful analysis of the new Law allows the conclusion that its main purpose is not to establish equal compensation for the same work as an employment right – which was already set in the Consolidation of Labor Laws -, but to create obligations of transparency, as well as enforcement mechanisms for employers and government authorities. 

There is also a clear intention of the legislator to tackle not only the equal pay for equal work issue, but also the valuing of the work performed by men and women, even when occupying different positions.

In other words, the Law innovates in Brazil on the battle against the so-called “structural discrimination”, which is not always visible or intentional, but still represents major risks for companies, both legal and reputational.

Gender Equalization as a Global Tendency at Work

Gender equalization is a global impulse which goes beyond the mere salary equality. The Conventions of the International Labor Organization – ILO - have long ago addressed gender equality in terms of opportunity and treatment at work, as well as in terms of value of jobs historically performed by women and men.

In Brazil, the equal pay for equal work principle was introduced in the Labor Code in 1952. But recently, in 2022, the so-called Emprega +Mulheres (or “Employ+ Women”) Law was enacted to address wage discrimination as a patrimonial violence, in addition to distinguishing companies that promote the division of parental care, and that create effective mechanisms to have more women in leadership positions.

Brazilian Law 14,611/2023 was clearly inspired by the European Directive on this subject (EU 2023/970), from May 2023, specially as regards information transparency as a mechanism for the correction of inequalities.

As in the new Brazilian Law, the European Directive also provides for the obligation of companies to prepare and deliver wages transparency reports, in addition to severe penalties in case of non-compliance with the equal pay principle, including fines and restrictions on contracting with public entities.

However, the (crucial) difference between the European initiative and the Brazilian one is that the first addresses issues of extreme relevance for companies – such as the confidentiality and safety of data and proper parameterization of the reports to ensure fair competition principles - in a more careful way.

Different from Brazil, the European Union also seems to be preparing for a safer and fairer implementation of wage transparency reports, as the Directive foresees a long transition phase, in line with the size of each business.

Brazil - Good Initiative, Sloppy Implementation

First, it might be important to clarify that Law 14,611/2023 has not changed the equal pay rules already existing in Brazilian legislation - specifically in article 461 of the Consolidation of Labor Laws - but created more severe legal consequences to companies which violates the equal pay principle based on gender.

The newly created fines can reach up to 10 times the value of the salary owed to the discriminated employee, which may also double in case of recidivism. Furthermore, the new Law confirms some existing court precedents, in the sense that, in the case of illegal salary differentiation, not only salary differences are due, but also compensation for pain and suffering, depending on the specificities of the case.

In addition, non-compliant companies may be required to increase the monitoring of situations of potential discrimination through channels for complaints, through diversity and inclusion programs in the workplace, in addition to the promotion, preparation and support for women to enter, remain and advance in the job market, in equal conditions with men.

Although the legislator’s intentions are very good, there are significant problems with the new obligation for companies with more than 100 employees to publish Semiannual Salary Transparency and Remuneration Criteria Reports.

Failure to comply with this obligation may result in administrative fines of up to 100 minimum wages (approximately US$27,000). In addition, if inequality in wages or remuneration criteria is identified, the company is required to present and implement an Action Plan to Mitigate Inequality in Wages and Remuneration Criteria between Women and Men, with defined goals and deadlines, to be built with the participation of union and employees’ representatives.

But this is not all. With good reason, companies fear about the protection of personal data, for fair competition laws, data security, and ultimately for their institutional image.

When Law 14,611 was published in July 2023, it was hoped that its upcoming regulation would bring greater comfort to companies in relation to these fears. But it did not happened that way.

Decree no. 11,795/2023, of November 2023, stipulated the months of March and September of each year for the publication of the Salary Transparency Report, starting in March 2024.

The Decree determined that employers should send information to the Ministry of Labor and Employment through a computerized tool, in addition to publishing the reports prepared by the Ministry of Labor to employees and the general public, using the company's own website and social networks.

And differently from what was foreseen in the Law, Ordinance 3,717/2023 assigned the Ministry of Labor and Employment - and not the companies - to prepare the Transparency Reports, based on the content of two portals used by companies to provide information to Government (eSocial and empregabrasil.mte.gov. br).

The Emprega Brasil Portal requests information about the existence of a career plan in the company, as well as information on the criteria used for career access, progression and advancement, incentives for hiring women, criteria used for promotion to leadership positions, and the existence of initiatives or programs to support the sharing of parental obligations.

In terms of General Data Protection Law, companies are concerned because, as we know, the anonymization proposed by the Ministry of Labor does not always guarantee and eliminate the risk of identification of the data subject. 

In addition, the reports will provide visibility into salary parameters and internal policies, which can negatively impact business and talent retention.

As the Ministry of Labor and Employment has already clarified that it will not make Transparency Reports available to companies in advance, and that they will only be responsible for disclosing what they receive, mass judicialization seems inevitable.

To make a long story short, despite the relevance of combating gender pay inequality, which places Brazil on the same path of the international movement against this issue, we anticipate massive litigation caused by Law 14,611, specially due to the uncertainty and risks arising from the enforcement methodologies adopted in Brazil.

By the date this article was concluded, on March 18, 2024, the Ministry of Labor had failed its March 15 deadline to release the first reports, and a couple of injunctions had already been granted, following hundreds of lawsuits on the matter.