Penalties for Pay Transparency Violations — What Your Business Risks (2026)

Why the Directive’s sanctions are unprecedented

Directive 2023/970 is not another regulation with abstract threats. It creates three mechanisms that together form the most aggressive enforcement framework in EU employment law:

• Full compensation with no pre-set maximum (Art. 16) — unlike most Bulgarian laws that cap damages, here the cap has been removed.
• Automatic reversal of the burden of proof (Art. 18) — if you have not fulfilled your transparency obligations, in court you prove that you did not discriminate. Not the worker. You.
• Collective actions by worker representatives (Art. 20) — combined with the transposition of Directive 2020/1828 on representative actions (effective in Bulgaria from February 2026), the risk of mass litigation is real.

These three mechanisms operate cumulatively. An employer without a transparent pay system may face a collective claim where they cannot defend themselves (burden is reversed) and owe compensation with no foreseeable limit.

For a full overview of obligations under the Directive, read: Pay Transparency Directive 2023/970 — what every employer needs to know.

Full compensation WITHOUT a cap (Art. 16)

Article 16 of the Directive is categorical: a worker who has suffered a violation of the equal pay principle is entitled to full compensation. What does this include?

• Full recovery of back pay — the difference between what was actually received and what the worker should have received, including bonuses and in-kind payments.
• Compensation for missed opportunities — if pay discrimination led to missed promotions, training, or other career opportunities, the employer owes compensation for those as well.
• Non-material (moral) damages — the Directive explicitly includes damages of a moral nature, which is a significant novelty for Bulgarian employment law.
• Interest for late payment — from the moment of the violation until full payment.

The key provision is in the last sentence of Art. 16(2): “Real compensation or reparation shall not be restricted by the fixing of a prior upper limit.”

For the Bulgarian context, this is revolutionary. The Anti-Discrimination Act traditionally operates with relatively low damage caps. The Directive prohibits such caps for pay discrimination.

Reversed burden of proof — automatic mechanism (Art. 18)

Article 18 establishes a two-step mechanism that fundamentally changes who proves what in court:

Step 1: Prima facie facts

When a worker presents facts from which discrimination can be presumed (for example: a woman in the same position receives 15% less than a male colleague), the burden of proof shifts to the employer. The employer must prove that the difference is justified by objective and gender-neutral criteria.

Step 2: Automatic mechanism for non-compliance

Article 18(2) provides for an automatic reversal of the burden when the employer has failed to comply with obligations under:

• Art. 5 — pay transparency before employment (salary range in job postings, prohibition on asking about salary history)
• Art. 6 — informing employees about pay criteria
• Art. 7 — right to information on individual and average pay levels
• Art. 9 — joint pay reporting
• Art. 10 — joint pay assessment

This is precisely why job grading and classification is the foundation for compliance — without an objective system for evaluating positions, you cannot justify anything.

Collective actions and representative proceedings (Art. 20)

Article 20 of the Directive provides that worker representatives (trade unions, works councils) and equality bodies (in Bulgaria — the Commission for Protection against Discrimination) can bring actions on behalf of several or all affected workers.

This mechanism acquires particular weight in the context of Directive (EU) 2020/1828 on representative actions for the protection of collective consumer interests, which has already been transposed into Bulgarian law. The result is clear: the class action risk is real in Bulgaria.

What does this mean in practice?

• A trade union can file a single action on behalf of all women in a company who earn less than men in equivalent positions.
• The Commission for Protection against Discrimination can initiate proceedings in the public interest, without the need for individual complaints.
• Compensation is calculated for each affected worker individually — with 50 or 100 employees, the sum grows linearly.

A collective action is a “damage multiplier” — an employer who would pay EUR 10,000 to one employee pays EUR 500,000 to fifty.

Fines and administrative penalties (Art. 23)

Article 23 requires Member States to establish “effective, proportionate and dissuasive” penalties that must include fines. When determining the amount, the following factors are considered:

• Gravity and duration of the infringement
• Intent or negligence
• Employer’s efforts to comply
• Size of the undertaking
• Repeated nature of the infringement

In Bulgaria, existing fines under the Anti-Discrimination Act are: EUR 128–1,278 for individuals and EUR 128–2,556 for legal entities. These amounts will likely be updated during transposition, but even current levels represent only the minimum of the financial exposure.

Why? Because administrative fines are a separate and additional mechanism. Compensation claims under Art. 16 — back pay, non-material damages, interest — are uncapped and independent of the fine amounts. An employer can be fined and ordered to pay compensation.

Protection against victimization (Art. 25)

Article 25 prohibits any adverse treatment of a worker, representative, or witness who exercises their rights under the Directive. What is prohibited?

• Dismissal — direct or constructive
• Demotion — in position or responsibilities
• Pay reduction
• Harassment — including creating a hostile work environment
• Discrimination — in training, promotion, task allocation
• Coercion and intimidation

This protection is particularly powerful in combination with whistleblower protection under the ZZLPSPOIN (Act on the Protection of Persons Reporting or Publicly Disclosing Information on Violations). An employee who reports pay discrimination is protected twice:

• Under Directive 2023/970 (Art. 25) — as someone exercising their rights
• Under the ZZLPSPOIN — as a person reporting a violation

Retaliatory measures against such an employee mean double liability — under both regimes simultaneously.

5 risk scenarios from practice

1. Job posting without salary range

A company publishes a “marketing manager” vacancy without a stated salary range. A female candidate is rejected and learns that the hired male receives 30% more than the offer discussed with her. She brings a claim. Since the employer did not comply with Art. 5 (no salary range), the burden of proof is automatically reversed under Art. 18. The employer must prove the difference is justified.

2. Pay secrecy clause

An employer includes a clause in employment contracts prohibiting employees from discussing their pay. Article 7(5) of the Directive explicitly provides that workers cannot be prevented from disclosing their pay. The clause is void. An employee penalized for violating it is entitled to compensation.

3. Unjustified gap of 5%+

The report under Art. 9 shows an 8% pay gap between men and women in the “IT specialists” category. The employer cannot justify the gap with objective criteria and does not conduct a joint assessment under Art. 10 within the prescribed period. Result: automatic reversal of the burden + right of every affected employee to bring an individual or collective claim.

4. Whistleblower + retaliation

A female employee reports systematic pay discrimination through the internal channel under the ZZLPSPOIN. The employer “restructures” her to a lower position. Double liability: violation of Art. 25 of the Directive + violation of the ZZLPSPOIN. Two separate grounds for compensation.

5. Collective action by 50+ female employees

A trade union presents data showing a systematic 12% pay gap affecting 50 women in a manufacturing company. It files a claim under Art. 20 on behalf of all of them. With an average annual gap of EUR 3,600 and a three-year limitation period: EUR 3,600 × 3 × 50 = EUR 540,000 — in back pay alone, excluding non-material damages and interest.

Financial exposure — a sample calculation

Consider a hypothetical but realistic example:

And this is a conservative estimate. The actual amount could be significantly higher with a larger pay gap, more affected employees, or a longer period.

Add to this the reputational damage: a public pay discrimination lawsuit affects employer branding, makes talent acquisition harder, and can lead to loss of key clients.

How to prevent the risks

Prevention is the only sensible strategy. Here are the five steps every employer should take before 7 June 2026:

1. Job grading and classification — the foundation of any equal pay system. Without objective job classification, you cannot prove that pay differences are justified. Grading is your shield when the burden of proof is reversed.
2. Pay transparency in recruitment — include a salary range in every posting, train HR not to ask about salary history, document the objective criteria for determining remuneration.
3. Trial GPG reporting — do not wait for the first mandatory report. Run a trial calculation now to identify and correct problem areas before they become public.
4. Correction of unjustified gaps — if the audit reveals differences that cannot be explained by objective criteria, correct them before the law takes effect. Preventive correction is many times cheaper than forced correction.
5. Document everything — every pay decision must be documented with objective criteria. When the burden of proof is reversed, documentation is your evidence.

Frequently asked questions