The brand new gender pay hole proposals in Brazil: what they could imply for employers

By José Carlos Wahle Partner – Brazil Veirano Advogados

New proposals on the gender pay gap in Brazil said employers would face heavier penalties for failing to pay men and women equally. This article explains.

On March 30, the Brazilian Senate approved a bill introducing a new sanction for cases where organizations have a gender pay gap for no non-discriminatory reason.

If approved by the President, the bill would increase penalties but not change the content of existing laws. These consist of the following framework:

• All forms of discrimination are prohibited in the 1988 Constitution.
• The Labor Code has provided equal pay for equal work since 1943. Article 461 (6) of the 2017 Labor Code provides for a fine to be imposed by the courts for cases of “gender or ethnicity” to be paid to the victim. The penalty is 50% of the maximum social security pension.
• Since 1999, the labor law has forbidden employers to take gender, age, skin color and marital status into account when determining wage, training and career opportunities (Article 373-A, point III).

The proposed bill would provide for a new penalty for violations of Article 373-A point III (see above) “relating to payment”. No reference is made to training or career opportunities. The penalty is five times the wage gap during the period of employment and is payable to the “employee” who is disadvantaged by the wage gap.

However, the text may have an application that goes beyond the gender pay gap. The draft law deals specifically with Article 373-A point III of the Labor Code, which not only covers protection against gender-based discrimination, but also the reasons for “skin color and marital status”. This means that an organization must not discriminate against a worker who is married or has children, not only in comparison to men but also to other women who are not married or who have no children.

The penalty applies to cases of discrimination, ie decisions based on prejudice against a personal characteristic. This means that this does not apply to wage differentials allowed under the equal pay rule in Article 461. These are differences that result from fluctuations in productivity, a tenure of more than four years, a tenure of more than two years and working time in different locations or when the company has registered its job and salary flow chart with the competent authority.

Despite its noble intent, the bill has a legal problem. The new penalty does not replace the existing one (sixth paragraph, Article 461), which means that employers could potentially impose a double penalty for the same violation (double exposure, which is generally prohibited). Even if the existing sentence can only be imposed by a judge and the new sentence can also be imposed on the basis of public examinations, they can relate to the same circumstances. In addition, the bill does not deal with the whole problem, only issues of payment. It does not address issues of vocational training or career opportunities, including promotions, which also deserve consideration when addressing equal opportunities.

Last but not least, if the bill were approved, the organizations would not have time to adjust salaries to eliminate involuntary wage differentials and would face potential substantial penalties immediately.

However, on April 23, the president spoke to the press and suggested that the Congress proposal be rejected. The impression was that he was testing the reaction of the public and the legislature. The law was recalled on April 28th and is expected to be reformulated soon.

All in all, employers in Brazil must take anti-discrimination rules very seriously, despite the potential problems the new law may have and the changed form it may take. Employees who are treated unfairly according to the rules for equal pay can demand an adjustment of their salary and performance as well as moral damage to be judged by a judge. In addition, the public prosecutor’s office can initiate investigations in the event of repeated discrimination and take legal action in court to demand redevelopment plus collective damage.