In its judgement of 23 October 2020, the Federal Labour Court ruled that a female employee can also use the salary of a male top earner as a comparison in an equal pay claim and that the median salary is not decisive. The Federal Labour Court has thus noticeably strengthened legal protection in equal pay claims.
Background
The plaintiff is demanding retroactive financial equality with male colleagues from her employer, based on information from a pay transparency dashboard on the defendant company’s intranet. She argued that the income of the male comparators was higher than the median salary of male colleagues at the same hierarchical level. The employer replied that the comparators did not perform the same work and that the differences in pay were due to the plaintiff’s lack of performance, which is why she was also paid below the median pay of the female comparator group.
The Regional Labour Court dismissed the claim as the plaintiff did not provide sufficient evidence of gender-based discrimination. However, the plaintiff was awarded an adjustment to the median salary of the male peer group.
The decision of the BAG
The BAG disagrees with the lower court decision of the LAG and partially overturns it:
It is sufficient for the presumption of pay discrimination on grounds of gender if an employee demonstrates that a single male colleague in a comparable position receives higher pay for the same or equivalent work. Contrary to the LAG’s assumption, a “predominant probability” of gender-based discrimination is not necessary. The size of the peer group is irrelevant for the presumption of discrimination to apply.
The naming of a single, better-paid comparative colleague is sufficient to trigger the reversal of the burden of proof under Section 22 AGG, which means that employers must substantiate and prove that objective, gender-neutral reasons justify the difference in pay.
The case was referred back to the Higher Labour Court to examine whether the employer can rebut the presumption of gender-based pay discrimination.
Recommended action: Review pay structure!
The BAG’s decision increases the pressure on employers to scrutinise pay structures. Pay structures and reasons for differentiation should always be fully and clearly documented, consistently applied and convincingly presented in the event of a dispute. The extension of the level of comparison also means that employers do not only have to consider median or average pay as before, but that any direct comparison with individual employees is possible (so-called pair comparison).
It is therefore all the more important to define and implement objective criteria for basic salaries and also for variable components (e.g. level of requirements, scope of responsibility, qualifications, professional experience, individual target achievement). It must be determined how these criteria are measured and weighted. Only in this way can employers succeed in justifying their decision within the framework of the reversal of the burden of proof.