A woman’s entitlement to equal pay for equal work cannot be circumvented by arguing better salary negotiations by a male colleague, the BAG said in its press release of 16 February 2023.
(Federal Labour Court, ruling of 16 February 2023 – 8 AZR 450/21)
The plaintiff had been employed by the defendant as a sales representative since 1 March 2017. An individual contractual basic salary of 3,500.00 euros gross was agreed. As of 1 August 2018, the remuneration was based on an in-house collective bargaining agreement, which, however, shall not be taken into further consideration in the following.
Negotiations of the male colleague for higher starting salary
A male colleague had been employed in the same position in sales since 1 January 2017. He also received a contract offer of EUR 3,500.00 gross but rejected this and demanded a higher basic salary of 4,500 euros gross. The defendant gave in to this demand — presumably also in view of the omnipresent shortage of skilled workers — and hired the male colleague.
The female employee, who had accepted the offer at EUR 3,500, consequently subsequently sued for payment of the back pay (EUR 1,000 gross more per month), as well as payment of appropriate compensation on the grounds of gender discrimination.
Equal pay is not a matter of negotiation | Presumption of discrimination
The lower courts did not consider this constellation to be a violation of the equal pay principle. The unequal treatment was justified and the result of negotiations. The employer’s argument was essentially based on the company’s interest in recruiting employees, which justified salary differences as an objective criterion.
The BAG disagreed and granted the plaintiff a claim to the same basic salary as her male colleague under Article 157 TFEU, Section 3 I and Section 7 Wage Transparency Act (EntgTranspG). In addition, the BAG awarded the plaintiff compensation in the amount of 2,000 euros under section 15 II AGG for discrimination on grounds of gender.
The fact that the plaintiff received a lower basic salary than her male colleague for the same work gave rise to a presumption under section 22 AGG that the discrimination was based on gender. The defendant had not succeeded in rebutting this presumption. In particular — according to the BAG — the defendant could not successfully plead that the higher basic pay of the male colleague was not based on gender, but on the fact that the male colleague had negotiated a higher salary.
Conclusion and outlook
Freedom of contract is limited by law and by the requirement of equal pay. § Section 7 of the Remuneration Transparency Act states: “In employment relationships, a lower remuneration may not be agreed or paid for the same work or for work of equal value than for an employee of the other sex on account of the sex of the employee”. One of the aims of this is to close the pay gap between men and women (the gender pay gap).
The ruling is celebrated in some quarters as a “milestone in equal pay”, while others criticise it as an inadmissible encroachment on private autonomy. In fact, it seems that the freedom of contract in salary negotiations (at least for the same positions and experience or knowledge) is largely nullified, or the gender that negotiates worse can simply demand an upward salary adjustment. In this case, the employer could also be credited with the fact that a different salary was not paid “because of gender”, but because of individual salary negotiations. However, the BAG has also put a stop to this. Once again, the Eighth Senate takes up a topical issue in a media-friendly manner and almost puts itself in the place of the constitutional or legislative body. The effects of the decision are likely to be considerable, although it remains to be seen whether the feared wave of lawsuits will materialise.
In any case, the freedom of contract and negotiation will be severely restricted by the BAG and employers will ask themselves twice whether and how salary adjustments and negotiations will be conducted in future (appropriate to the individual case). In the case of differences in remuneration, employers will in future be obliged to present (and document in advance) further objective reasons which justify the different remuneration in the individual case. Different negotiation results are no longer sufficient for this purpose.
It remains to be seen what the BAG’s written reasoning will be, from which further recommendations for action may result.
For further information, please contact:
Benjamin Karcher, Bird & Bird
benjamin.karcher@twobirds.com
