Equal pay: Employers have a high burden of proof to refute presumed discrimination on the grounds of gender

The Baden-Württemberg Higher Labour Court (Court) dealt with a claim for higher pay under the German Pay Transparency Act (Entgelttransparenzgesetz, EntgTranspG). The Court clarified that the presumed discrimination could only be refuted if the court was able to understand the criteria for the difference in pay. If an employer's submission does not allow for effective control and verification of the differentiation criteria, this is to its detriment (judgement of 19 June 2024, 4 Sa 26/23).

FACTS

The plaintiff employee asserted a claim against her employer for equal pay. She argued that she had been paid less than her comparable male colleagues. The comparison group used by the plaintiff corresponded to the comparison group created by the defendant itself and entered into its pay transparency dashboard. With regard to the higher remuneration of the male colleagues, the defendant referred to their age and longer professional experience as well as to the fact that the plaintiff had performed below average. However, it did not explain how these remuneration criteria were assessed in detail and weighted in relation to each other.

LEGAL PRINCIPLES

The basis for equal pay claims is Section 3 para. 1, Section 7 EntgTranspG. These standards prohibit lower pay for equal or equivalent work on the basis of gender. Equal work and work of equal value are defined in Section 4 EntgTranspG. Section 22 General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) is of particular importance in legal disputes concerning equal pay: If one party proves circumstantial evidence that suggests discrimination on a ground specified in Section 1 AGG (in this case gender), the other party bears the burden of proof that there has been no breach of the provisions on protection against discrimination. Therefore, in order to rebut this presumption of discrimination, the employer must demonstrate and, if necessary, prove that only reasons other than gender led to less favourable treatment.

DECISION OF THE COURT

The Court upheld the claim for equal pay. The evidence of unequal treatment could be seen from the information in the pay transparency dashboard created by the employer itself. According to this, the plaintiff was paid less than the male colleagues in the peer group formed by the employer. The defendant was unable to rebut the presumption of discrimination on the grounds of gender. It had argued that the difference in treatment was due to the different quality of work and differences in professional experience and length of service. However, it failed to explain how these criteria were assessed in detail and how they were weighted in relation to each other.

TAKEAWAYS FOR EMPLOYERS

The Court’s requirements for rebuttal by the employer correspond to the case law of the Federal Labour Court. In order to refute the presumed discrimination, the employer must argue (and prove in the event of a dispute) that the differentiation criteria used are weighted in a non-discriminatory manner and are transparent overall. The submission must allow for effective control and review by the courts. If this is not accomplished, the employer will not discharge the burden of proof.

The judgement makes it clear that the assertion of suitable reasons alone – such as longer length of service – are not sufficient to justify different treatment. It is essential that salary decisions are based exclusively on non-discriminatory and transparent criteria and that this can be proven. In the event of a dispute, the court must be able to understand the assessment and weighting of the criteria. Remuneration systems and individual salary decisions must therefore be measured against these standards.