France Pay Equality – Red Alert

After months of debate, the French Parliament has finally voted on a law, “For the Freedom to Choose One’s Professional Future,” which introduces several new obligations for companies, including transparency requirements to reveal gender pay gaps, and an obligation of result in equal pay. The law also introduces financial penalties for violations of these obligations.

Since our last RedFlash on gender equality, the law “For the Freedom to Choose One’s Professional Future,” was voted on by Parliament on August 1, 2018, and enacted on September 5, 2018 (hereinafter the Law). This Law has implemented most of the French government’s proposals of March 2018.

One or several decrees must be issued by the government to specify some provisions of the Law, although no specific dates have been set for issuing those decrees.

These measures in favor of gender equality will enter into force on a date to be fixed by the decree(s) and, in any case, no later than January 1, 2019, for companies employing more than 250 employees; and January 1, 2020, for companies employing between 50 and 250 employees.

Toward Gender Pay Equality

According to French law, all companies must comply with the principle of equal pay for men and women no matter their size, and must pursue the objective of eliminating gender pay gaps. However, the Law introduces binding measures only for companies employing more than 50 employees.

These companies must disclose, each year, indicators relating to gender pay gaps and actions implemented to eliminate those gaps. Information on methodology and content of the indicators mentioned above must be included within the social and economic database provided to the staff representatives.

When the results of the measurement of wage gaps obtained in light of the aforementioned indicators are below a certain level, which will be later fixed by a decree, there are two consequences:

  • On the one hand, the employer must propose, in the context of the negotiation regarding professional equality between men and women (which must occur at least once every four years), a catch-up plan including, if necessary, financial measures to eliminate the wage gap. If no collective agreement containing such measures has been entered into, the employer must determine itself the measures to be implemented, consult the economic and social committee (CSE), and inform the labor authorities. If the employer does not publish the information on gender wage gaps or the financial measures taken within the catch-up plan, it incurs a financial penalty of up to 1% of the total payroll.
  • On the other hand, if, after three years, the results of the measurement of wage gaps are still below a certain level (also to be fixed by a decree), the employer incurs a financial penalty set by the labor authorities of up to 1% of the total payroll, unless the employer is granted an additional one-year delay.

Furthermore, each professional branch must publish, within their annual activity report, specific information regarding professional equality, including an assessment of the branch’s actions in this respect and of the tools made available to companies for preventing and remedying sexual harassment and gender-based behavior.

Reports on Gender Equality

As before, the Board of directors (conseil d’administration) and the Supervisory Board (conseil de surveillance) of French public limited companies (sociétés anonymes) and French limited partnerships (sociétés en commandite par actions) must each year deliberate on the company’s policy on professional and wage equality. However, the Law now requires these two boards to rely upon information including but not limited to the indicators disclosed each year by the employer and the economic and social database.

Besides, the corporate governance report drawn up by the Board of Directors and addressed to the ordinary general meeting must now contain information on (i) how the company seeks a balanced representation of men and women within the Executive Committee (Comex), if any; and (ii) the results in terms of gender balance among the 10% of positions having the highest level of responsibility. These new rules are applicable as of September 7, 2018.

In conclusion, although no decree has yet been enacted, employers need to anticipate the application of the Law which adds a new layer of complexity to a preexisting set of regulations. Companies incorporated as a public limited company or a limited liability company must already comply with some provisions of the Law.

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