Equal Pay – Decision of the LAG Baden-Württemberg of June 19, 2024

Pay transparency

Gender-based pay discrimination can result in significant expenses for companies.

We have already referred to the Pay Transparency Directive in our blog post of August 2, 2024, and emphasized the importance of its timely implementation for companies.

Due to recent court decisions, the rightly important issue of equal pay is already becoming increasingly crucial in practice.

Federal Labor Court (BAG) decision dated February 16, 2023 – 8 AZR 450/21

The Federal Labor Court’s decision of February 16, 2023 was pivotal: the employer was required to pay the plaintiff the same salary as a male colleague with a comparable position.

The colleague had achieved this level of pay as part of a salary negotiation process. According to the BAG, there was a presumption of gender discrimination due to the female employee’s lower remuneration. The employer could not disprove this presumption. For the BAG, the reference to salary negotiations was not sufficient.

In the view of the BAG, a difficult labor market situation should certainly be able to justify increasing remuneration when hiring new employees. However, based on the BAG findings, the employer did not provide such reasons.

State Labor Court (LAG) Baden-Württemberg decision dated June 19, 2024 – 4 Sa 26/23

The LAG Baden-Württemberg further developed the BAG case law in its decision of June 19, 2024.

Background

A female employee demanded a higher remuneration from her employer on the basis of equal pay. From the employee’s perspective, she was discriminated against in her remuneration compared to her male colleagues. In fact, the basic remuneration and the dividend-equivalent pay component were lower for the female employee than for male colleagues in the comparison group. Based on a pay transparency dashboard maintained by the employer, these remuneration differences were uncontested.

The employer attempted to defend against the allegation of having discriminated. The higher age and experience of the colleagues should explain the difference in remuneration. The employee’s value contributions should also have been lower than those of her comparison group, regardless of gender. In both courts – the Labor Court Stuttgart and the LAG – the employer failed.

Decision

The LAG Baden-Württemberg considered the employee’s statement to be sufficient evidence of discrimination under Section 1 of the AGG. The court referred to the BAG’s decision of February 16, 2023 (8 AZR 450/21), according to which the established difference in remuneration leads to a presumption of a violation on the basis of equal pay.

The employer would then have had to fully explain and, if necessary, prove under Section 22 of the AGG that the difference in pay was based solely on a reason unrelated to gender.

Despite the employer’s failure, the LAG Baden-Württemberg initially conceded that pay differentiation based on the criteria of “professional experience,” “length of service,” and “quality of work” was generally permissible. In the specific case, the employer had not sufficiently explained the assessment of these criteria and their relationship to each other, according to the LAG Baden-Württemberg.

As a result, the employee was granted the desired claim pursuant to Art. 157 TFEU, Sections 3 paras. 1, 7 EntgTranspG.

Practical advice

It should be clear by now that it will be difficult to justify gender pay gaps for comparable work. In particular, the question of how employers can prove that they are not discriminated against on the basis of gender pursuant to Section 22 of the AGG is likely to be pivotal.

Such an issue is not entirely new, but in principle is already known from matters arising from the General Equal Treatment Act. However, the issue takes on a new form in the context of equal pay. Previous practical experience, for example in the context of alleged discrimination on the basis of severe disability or religion in the application process, shows that thorough documentation of the application process is essential for a successful defense in court.

Follow-up questions

There are still a number of unresolved legal issues regarding the important matter of equal pay.

• For example, there is still some uncertainty about the extent to which employers will have to provide evidence to defeat the presumption of gender pay discrimination. Specifically, the issue is how the employer should have evaluated and compared the criteria in the proceedings before the LAG Baden-Württemberg.

• It is also unclear whether pay disparities will always result in an “upward adjustment” or whether it will also be possible to remedy pay disparities by reducing the higher salary. In this case, the high legal requirements for a notice of termination to reduce the remuneration are likely to be relevant.

• Employee privacy could also play an important role in the equal pay context. With reference to the decision of the BAG, employers could try to justify a higher salary with a difficult situation on the labor market.

It may be necessary to prove that applicants were not willing to work for the remuneration originally advertised, taking into account the applications received. This conflicts with employee privacy requirements that impose quick timeframes for deleting job applications.

To keep up with the latest news on the significant issue of equal pay, we encourage you to follow Ogletree Deakins’ upcoming blog posts on the topic.

Photo: shutterstock / Andrey_Popov