Quick Hits

• A female employee was not entitled to an “all the way to the top” compensation adjustment in a gender discrimination case, where the comparator was the highest-paid colleague worldwide, a German Regional Labor Court ruled.
• However, the female employee was awarded higher remuneration in accordance with the discrepancy between the medians of the comparison groups of men and women.
• The court determined that the discrepancy between the employer’s male and female median pay was the sole indication of gender-based discrimination.

In this case, the plaintiff sought compensation for the pay gap with a named male colleague, the highest-paid colleague worldwide at the same management level over the past years. The Regional Labor Court (Landesarbeitsgericht, LAG) ruled in favor of the plaintiff, awarding higher remuneration in accordance with the discrepancy between the medians of the comparison groups of men and women.

Decision

The LAG awarded the plaintiff remuneration in the amount of the difference between the medians of the male and female comparison groups. The plaintiff, whose remuneration fell below the median of the female and male comparison groups, based her claim on the German Pay Transparency Act (Entgelttransparenzgesetz, EntgTranspG) and the principle of equal treatment.

After a comprehensive review, the court determined that the discrepancy between the male and female median pay was the sole indication of gender-based discrimination. The plaintiff was unable to pursue a claim for equal pay with the highest-paid colleague because the court found insufficient evidence of direct discrimination at that level.

In accordance with Article 157 of the Treaty on the Functioning of the European Union (TFEU) and §§ 3 (1), 7 of the EntgTranspG, both women and men are entitled to equal compensation for comparable roles. Therefore, any indication of pay discrepancies based on gender cannot be grounds for a claim to the maximum difference in compensation. Rather, there must be clear evidence of gender-based discrimination in the form of a specific amount. In this case, the remuneration of the male colleague used for comparison was above the median of the male comparison group, while the plaintiff’s remuneration was below the median of the female comparison group. Therefore, there was no sufficient presumption of causality that the entire difference in the plaintiff’s remuneration level compared to that of her highest-paid male colleague was based on gender-specific discrimination.

Moreover, the adjustment “to the top” could not be based on the principle of equal pay under labor law, as this always refers to differentiations within the favored group based on the average value. Otherwise, the employer would be unable to justify the remaining unequal treatment, such as professional experience, length of service, or quality of work.

It should be noted that the judgment is not yet final.

Key Takeaways

The only available source of information is the press release from the Regional Labor Court. The court rejected the employee’s claim of gender-related discrimination, which would have justified an adjustment to the top. The employee’s remuneration was below the median of the female comparison group, as determined by the employer. The judgment made it clear that unequal treatment can be justified, provided that the employer can refer to specific, gender-neutral criteria, such as professional experience, length of service, or quality of work, and that the criteria can demonstrate their specific impact on remuneration.

This recent decision by the Regional Labor Court of Baden-Württemberg, as well as a ruling by the same court issued in June 2024, serve as a reminder that companies may want to take the initiative to address the issues of equal pay and pay transparency. In the June 2024 decision (case 4 Sa 26/23), the court held that employers must prove that unequal pay for the same work is not due to gender.

Employers may also want to note that European Union member states have until June 7, 2026, to implement the EU’s Pay Transparency Directive.