Brazil’s new pay equality law: the practicalities

In July 2023, Brazil passed a landmark Federal Gender Pay Gap Law which requires large employers to bi-annually report on differences in pay between men and women in management and leadership positions. The law also addresses pay and career discrimination against minorities. Then in November 2023, the government issued a Federal Decree and an Ordinance that provided more detail on the Law’s reporting obligations and the administrative mechanisms for the Ministry of Labour to enforce those obligations. As much as these steps were needed, the legislation and directives leave some significant legal issues unresolved.

The Gender Pay Gap Law requires covered employers (i.e. those with 100 or more employees) to submit biannual ‘Salary Transparency Reports’. However, the Ordinance takes the preparation of these Reports out of the hands of employers and gives it directly to the Government. Employers must submit anonymised data on remuneration broken down by gender, and the Government prepares Transparency Reports based on that data. This was a surprising move, since under the legislative scheme the Ordinance cannot add new requirements to the Law and the Decree, nor can it modify them. 

In the first round of reports issued in March, the template Transparency Report does not use individualised salaries, but instead uses salary averages and medians of employees grouped under the Brazilian Classification of Occupations (‘CBO’). However, there is still no clarity on how to distinguish the actual gender pay gap from distortions resulting from the wide range of positions covered by each CBO. In addition, there is no clarity on how employers will be able to demonstrate that any pay gaps are justifiable under legal criteria. 

The Government has admitted in a live session that the use of CBOs will inevitably lead to distortions in the Reports. The Law provides that wage differences are prohibited in the event of ‘work of equal value or in the exercise of the same position’. Under existing labour legislation, ‘work of equal value’ considers factors including technical proficiency, differences in length of service, and differences in time in the position. However, the grouping of employees under the CBOs will result in the disregarding of the positions and the elements of ‘work of equal value’. The CBO will put positions with obvious differences, such as the CEO and managers, in the same group. 

The Gender Pay Gap Law provides for the application of penalties (administrative fines and moral damages in lawsuits) in cases of wage discrimination. However, according to information provided by the Ministry of Labour, fines will be applied upon a simple finding of unjustified salary differences between men and women. 

Employers will not have the opportunity to provide sufficient necessary clarifications on the Report before its publication. Moreover, it is unlikely that the limited clarification notes will prevent the employer from being audited and assessed for administrative fines, since these notes will necessarily be generic and concise to comply with data protection and privacy rules.   

If there is a finding of unjustified pay inequality, the Gender Pay Gap Law requires the employer to prepare an Action Plan to remediate the inequality. The Law provides that the Action Plan must be prepared in collaboration with the applicable union. However, there is no clarity on how this collaboration should take place. Nor are there any elements that indicate that the unions have the ability to engage in such collaboration, unlike what occurs with topics such as work shifts and occupational safety and health. 

The Gender Pay Gap Law is a sweeping initiative to promote gender pay equality, with consequences for employers who fail to meet the Law’s requirements, which is welcome. However, as discussed, the Law and its implementing directives still leave certain gaps, uncertainties and open questions. Employers will need to tread carefully until further clarification arrives.  

In view of this situation, some employers’ associations have recently taken legal action seeking injunctive relief to:  

• suspend the publication of Transparency Reports until there is more clarity about the distortions caused by the use of the CBO classification; and  

• prevent the authorities from assessing fines for salary discrimination while uncertainty remains regarding the extent of distortions caused by the use of the CBO and regarding how disparities can be justified under the notion of ‘work of equal value’.