Judgment of the Federal Labour Court of 21 January 2021 in Case 8 AZR 488/19
On 6 July 2017, the Act to Promote Transparency in Wage Structures (Entgelttransparenzgesetz, EntgTranspG) entered into force. It aims to implement the right of women and men to equal pay for equivalent work. It therefore prevents employers from paying an employee less than it pays a member of the opposite sex. The Act provides possible persons concerned with an instrument to help them uncover such discrimination: a right to access information. When requested, employers must provide the average comparable pay of all employees of the opposite sex. Until now, there was some dispute as to how useful this information would be. A claim for pay discrimination was considered difficult to enforce as employees often could not prove the reason for the difference in pay. A judgment of the Federal Labour Court (Bundesarbeitsgericht) of 21 January 2021 now shows that the Act to Promote Transparency in Wage Structures is more than a tiger without fangs.
Lower pay establishes an assumption of discrimination based on sex
Employers should sit up and take notice of this judgment of the Federal Labour Court. According to the Court, the fact that a woman earns less than the comparable pay of her male colleagues will normally establish a rebuttable presumption of discrimination on pay based on sex. It will then be for the employer to rebut this presumption. Until now, there has been some dispute over who has the burden of proving that lower pay also constitutes discrimination “based on sex”.
The head of a department from Lower Saxony requested information from her employer on the average salary of comparable male heads of department. This showed that the median salary was eight percent higher. The employee claimed payment of this difference in salary from her employer based on the Act to Promote Transparency in Wage Structures. The employer argued that this difference could be explained by various other factors and had nothing to do with sex. At first instance, the Court awarded the head of department the difference in pay she claimed. On appeal, the Labour Court of the Land held in favour of the employer and dismissed the case. The Court argued that the employee had not been able to show sufficient connection between the lower pay and her sex. The fact that she received lower pay than the male heads of department was not alone sufficient indication of discrimination based on sex.
The General Act on Equal Treatment and the search for evidence
The General Act on Equal Treatment (Allgemeine Gleichbehandlungsgesetz, AGG) recognises so-called “taboo” attributes, which may not be used to discriminate in the workforce. The second attribute on this list is sex. Generally, the person claiming discrimination has the burden of providing that there is discrimination – thus the employee. This is problematic because there is often only circumstantial evidence and no clear evidence of the reason for any discrimination. Paragraph 22 of the General Act on Equal Treatment eases the burden of proof for employees: the employee now only has to present circumstantial evidence that indicates discrimination based on one of the “taboo” attributes. If the employee is successful in evidencing such an indication, the employer will have the burden of proving that it has not infringed the prohibition against discrimination.
Facilitating the easing of the burden of proof
The judgment of the Federal Labour Court facilitates the easing of the burden of proof for employees when claiming pay differences compared to colleagues of the opposite sex. According to the Court, information showing that the comparable salary of those colleagues is higher constitutes the necessary indication of discrimination. The Federal Labour Court thus expressly overruled the Labour Court of the Land of Lower Saxony. Simply, the fact that there is a pay difference between male and female employees in comparable positions is sufficient to establish the assumption that the lower pay was based on sex. The employer must disprove this assumption in order to successfully defend itself against a claim for payment of the difference in pay. The Federal Labour Court remitted the case back to the Labour Court of Lower Saxony for the determination of whether the employer accomplished this.
Where the equal payment of male and female employees is not already ensured through collective bargaining agreements, salary ranges or comparable mechanisms, employers should examine whether they fall under the scope of the Act to Promote Transparency in Wage Structures. For example, the right to information, which would uncover a pay difference, only applies as a rule to employees in businesses with more than 200 employees for the same employer.
Where employees may make such requests for information, and employers are required to fulfil such requests, it would be beneficial if the employer has already identified any differences in pay between female and male employees. Employers will have to justify such differences to their employees, but they will also have to provide significantly more detail to justify it to the courts. This will require evidence that shows why the differences in pay are based on reasons other than sex. In this respect, employers should refer to criteria based on the labour market, performance and work product, which the better earning group fulfils, regardless of whether they are female or male.
Author: Julia Wendel