Federal Labor Court: ruling against the gender pay gap

In its ruling of February 16, 2023 (Case No.: 8 AZR 450/21), the Federal Labor Court decided that a woman is entitled to equal pay for the same work or work of equal value if the employer pays male colleagues higher pay on the basis of gender. According to the Federal Labor Court, this does not change if the male colleague demands higher pay during contract negotiations and the employer gives in to this demand.

In the case decided, the defendant, a medium-sized company from the metal and electrical industry, hired the plaintiff in the sales area as of January 1, 2017. On March 1, 2017, another colleague was hired in the company in the same area (and with comparable tasks). As part of the contract negotiations, which took place almost simultaneously, the company offered both of them a monthly basic salary of EUR 3,500.00 during the induction period and, from November 1, 2017, additional, performance-related remuneration. The applicant accepted the offer during the application process. The male applicant did not agree with the offer and demanded a monthly basic salary of EUR 4,500.00 already for the duration of the familiarization period until October 31, 2017. The company agreed to this and hired both of them at the different conditions.

In her lawsuit, the plaintiff demanded the subsequent payment of further compensation in the amount of 14,500.00 euros gross. She claimed that the lower remuneration discriminated against her on the grounds of her gender. In addition, the plaintiff demanded appropriate compensation for the discrimination she had suffered. The defendant company objected that the higher remuneration of the male colleague was not based on his gender, but on the contractual negotiations conducted with him, and that this should be permissible within the framework of contractual freedom.

The lower courts had dismissed the action. In its appeal, the plaintiff continued to pursue the claims asserted in the lawsuit. And in doing so, it was largely successful.

In the opinion of the Federal Labor Court, the plaintiff therefore had a claim under Article 157 TFEU, Section 3 (1) and Section 7 EntgTranspG to the same basic pay as her male colleague. The fact that the plaintiff received a lower basic salary than her male colleague for the same work gives rise to the presumption under Sec. 22 AGG that the discrimination was based on gender. The company had not succeeded in rebutting this presumption. In particular, the defendant could not successfully rely on the fact that the higher basic salary of the male colleague for the period from March to October 2017 was not based on gender, but on the fact that the male colleague had negotiated a higher salary.

In addition, the plaintiff was awarded compensation for discrimination on the basis of gender in the amount of 2,000.00 euros.

PBC legal takeaways: The final classification of the Federal Labor Court's ruling is still subject to the formulation of the reasons for the decision. However, it can already be expected that employees will increasingly assert claims for information against employers under the German Pay Transparency Act in the future and that employers will have to face questions about pay equity. Employers are already advised to keep sufficient documentation on the objective reasons for possible unequal pay treatment as part of the design of legally effective and motivating remuneration systems - even in small companies. We will be happy to advise you on the design of salary structures under employment law.