A matter of negotiation or equal pay?

Federal Labor Court (BAG), Judgment dated February 16, 2023 - 8 AZR 450/21 (press release).

Equal pay for equal work or work of equal value - this is how the BAG now also ruled in the case that a male employee negotiated his salary more effectively than his female colleague. In this article, we examine the practical implications of this decision.

Facts

The plaintiff has been employed by the defendant as a sales employee since March 1, 2017. Her individually agreed fixed salary at the beginning of the employment amounted to € 3,500.00 gross.

The defendant paid a higher fixed salary to a male sales employee hired two months prior to the plaintiff. Both he and the plaintiff were offered €3,500.00 gross. However, he rejected this offer and negotiated a higher salary of €4,500.00 gross for the period until October 31, 2017. As of July 2018 onwards, the defendant and the male colleague agreed upon a fixed salary which, at €4,000.00 gross, was still higher than that of the plaintiff. The defendant justified this by claiming, among other things, that the male colleague had succeeded a female sales employee who had left the company and received a higher salary.

As of August 1, 2018, the remuneration of the plaintiff and the male colleague became subject to an in-house collective agreement, which provided for a fixed salary of €4,140.00 gross for both of them - as they were in the same pay category. However, the in-house collective agreement contained a cap that only allowed a gross salary increase of €120.00. This resulted in the defendant paying the male colleague a fixed salary of €4,120.00 gross and the plaintiff a fixed salary of only €3,620.00 gross.

The plaintiff brought an action for overdue pay compared to her male colleague and also sought appropriate compensation in the amount of at least €6,000.00.

Content of the press release

Whereas the lower courts dismissed the claim, the BAG upheld the payment claim in its entirety and also awarded the plaintiff compensation in the amount of €2,000.00 in accordance with Section 15 (2) of the General Equal Treatment Act (AGG). The BAG found that the plaintiff had been discriminated against because of her gender. Despite the fact that she and her male colleague performed the same work, the plaintiff had received a lower fixed salary. She therefore had a claim under Article 157 of the Treaty on the Functioning of the EU (AEUV), Section 3 (1) and Section 7 of the Remuneration Transparency Act (EntgTranspG) to the same fixed salary as her male colleague.

Beyond that,  the fact that the plaintiff received a lower salary for the same work establishes the presumption (Section 22 AGG) that the discrimination was based on gender ( BAG, Judgment dated January 21, 2021 - 8 AZR 488/19).

The BAG explicitly stated that the reference to the allegedly superior negotiating skills of the plaintiff's male colleague cannot refute the presumption of discrimination on the grounds of gender.

Neither was the BAG convinced by the subsequent reasoning that a higher salary had been paid because the male colleague had succeeded a better-paid female employee.

Practice note

The BAG's decision clearly shows that the argument of individual negotiating skills is not adequate to justify a difference in pay between women and men.

If a female employee can demonstrate - as was the case here - that a male colleague earns more and performs the same work or work of equal value, this constitutes to a presumption of discrimination on the basis of gender.

The employer then must refute this presumption. He must demonstrate and, if necessary, prove that objective and gender-neutral reasons justify a difference in pay. Such reasons are for example

• the qualification or
• work experience

In light of this decision, employers should review their compensation systems for risks of discrimination. In future salary negotiations, they should document precisely which objective and gender-neutral criteria led to a specific compensation decision.

For a further classification of the decision - in particular on the question of whether the aforementioned principles would also apply in favor of a male colleague – the specific reasoning given by the BAG remain to be determined.