Brazil: Spotlight Q&A With Aline Fidelis - The New Equal Pay Law

CAN YOU PROVIDE SOME BACKGROUND TO THE NEW EQUAL PAY LAW?

The Law No. 14,611, also known as the Brazilian equal pay law, came into force on July 4, 2023. It is regulated by Decree No. 11,795, of 2023, and by the Brazilian Ministry of Labor's Ordinance No. 3,714.

The new provisions aim to reduce workplace inequalities based on gender and other characteristics such as race, ethnicity, nationality, and age, as well as to guarantee equal pay. The law establishes new obligations that employers in Brazil must comply with concerning the adoption of mechanisms for transparency and, if necessary, actions to mitigate salary differences.

WHAT ARE THE KEY PROVISIONS OF THE NEW LAW?

The new equal pay law established a new directive for equal pay, primarily with respect to the identification of salary differences between men and women, but it also considers other characteristics, e.g., race, ethnicity, nationality, age, etc. Under the new regulation, the Brazilian Ministry of Labor will prepare and disclose a Salary and Remuneration Criteria Transparency Report ("Transparency Report") in March and September of each year, covering employers with 100 or more employees. The Transparency Report will contain statistical information regarding internal salary differences, which employers are required to make publicly available on their website or social media.

The Transparency Report will be based on (i) the public employment information required by law to be posted on eSocial, the Brazilian government's platform for information regarding employment, tax and social security; and (ii) additional information regarding internal remuneration practices and policies previously provided by the employer to the Ministry of Labor in February1 and August.

If any salary discrepancies are identified, based on the Transparency Report, the employer may be notified by the Ministry of Labor to take action, which involves preparing an action plan to mitigate workplace inequality within 90 days from the date of notification. Preparation of the action plan must include the participation of the union that represents the employees or employees' representatives, and the final version of the plan must be filed with the union.

Additionally, the new law provided for changes in the Brazilian Labor Code, establishing that the payment of salary differences regarding salary discrimination on the basis of gender, race, ethnic origin, or age does not preclude the employee's right to file indemnification claims for moral damages, and that labor authorities will apply higher fines to the emaloyer where salary discrimination is identified.

WHICH EMPLOYERS ARE AFFECTED?

All employers are required to guarantee a workplace free of any kind of discrimination, and it is expected the inspections and enforcement by the labor authorities from the Ministry of Labor on this matter will increase as of the enactment of the new equal pay law. However, the obligations related to the disclosure of the Transparency Report and the creation of action plans will only apply to employers with 100 or more employees. Potential fines stemming from non-compliance will be equivalent to up to 3% of the employer's payroll, up to a limit of 100 times the Brazilian minimum wage.

WHAT STEPS SHOULD EMPLOYERS TAKE TO COMPLY WITH THE NEW LAW?

In order to avoid running afoul of salary discrimination laws, it is recommended that employers adopt career and salary plans with a clear job function and salary framework based on objective criteria, as well as consider the adoption of DEI policies aimed at the reduction of any workplace inequality between men and women and other characteristics.

Regarding the procedures related to the Transparency Report, employers with 100 or more employees must:

• observe the deadline for submission of employment information to the Ministry of Labor (i.e., the deadlines for submission of information in eSocial, and the deadline to provide additional information regarding the Transparency Report in February and August of each year);
• publish the Transparency Report prepared by the Ministry of Labor every March and September on the company's websites or social media to avoid potential fines by the labor authorities; and
• if notified, prepare an action plan to mitigate workplace inequality in accordance with the law (i.e., regarding the plan's provisions and the procedures related to the employees' and union's participation).

Footnote

1. The deadline to submit additional information regarding the first Transparency Report in 2024 was extended to March 8.