Current Developments in Equal Pay Law: Jurisprudence of the Federal Labor Court on Pay Equality
The issue of pay equality between women and men has gained significant legal and social relevance in recent years. With its judgment of February 16, 2023 (Ref.: 8 AZR 450/21, published on October 24, 2023), the Federal Labor Court (BAG) established groundbreaking principles for the judicial enforcement of the right to equal pay for equal or equivalent work. This has renewed the need for discussion among companies, investors, and all those involved in international business compliance.
Historical and Legal Context
Development of the Legal Situation
The principle of pay equality has been an original part of Union law since 1957 (Art. 157 TFEU) and has been concretized at the national level, among others, through the General Equal Treatment Act (AGG) and the Pay Transparency Act (EntgTranspG). Nevertheless, considerable wage differences between genders, known as the “gender pay gap,” still exist in the German economic area.
Importance for Companies and Employees
The applicable legal provisions have especially strengthened the burden of proof rules in favor of female employees. For companies, this means—regardless of the chosen remuneration structure—an increased obligation to present and prove facts whenever a direct or indirect connection between gender and pay difference is alleged.
Analysis of the Federal Labor Court’s Decision
Key Statements of the Judgment
The BAG clarified that the claim to equal pay for equal or equivalent work derives directly from § 3 paragraph 1 and § 7 EntgTranspG in conjunction with Art. 157 TFEU. The judgment gains particular significance through the specification of the burden of presentation in pay-related lawsuits: It is sufficient for the claimant to present facts that make an objective pay difference between a male and a female employee in a comparable position plausible.
Practical Consequences
In particular, the defendant must substantiate and, if necessary, prove that there is no discrimination based on gender or that any salary differences are justified for valid reasons. The BAG thus shifts a substantial part of the procedural responsibility to the employer and lowers the judicial hurdles for employees to successfully assert a claim for equal pay.
Opportunities and Risks in the Corporate Context
Compliance and Risk Management
The updated jurisprudence strengthens the requirements for internal remuneration structures and the documentation of differentiation criteria. Especially international companies and investors active in Germany or holding subsidiaries should be able to transparently document the factual justification of pay differences on reliable, non-discriminatory grounds to minimize liability risks and reputational damage.
Impact on Operational Practice
The decision underscores the importance of structured compensation management and promotes an open discussion within companies about the often complex causes of wage differences. Employers are required to regularly evaluate existing systems and identify the need for adjustments to sustainably comply with legal and Union law requirements.
Outlook and Ongoing Developments
The BAG ruling marks an important milestone and is expected to influence future legislative initiatives and further case law on pay transparency. Whether and to what extent a reversal of the burden of proof will also establish itself in other cases remains to be seen and depends on further court proceedings and the interpretation of directive requirements. Courts will be required in the coming years to strike a balanced relationship between entrepreneurial freedom and protection against discrimination.
Source reference: The information is based on the judgment of the Federal Labor Court dated 16.02.2023 (Ref.: 8 AZR 450/21), accessible, among others, at https://urteile.news/BAG_8-AZR-30024_Gleicher-Lohn-fuer-Frauen-Bundesarbeitsgericht-erleichtert-Klagen-fuer-Equal-Pay~N35505. The content presented serves to inform about the current legal situation; the presumption of innocence applies as long as legal disputes are not finally resolved.
Concluding Remarks
The increasing complexity of legal requirements on pay equality demands careful legal analysis and ongoing review of corporate structures. Companies and affluent private individuals seeking targeted solutions for individual challenges will find further information and personalized support in the field of labor law at the following link: Legal Advice in Labor Law.
