Equal Pay in Germany in 2023

Equal Pay Day symbolises the day of the year that is supposed to draw attention to the difference in pay between men and women. This is because it represents the day in the year up to which women would work for free in comparison to their male colleagues due to the existing wage inequality, if it were assumed that they would receive the same hourly wage. After International Women's Day had already been celebrated on 8 March at the beginning of the 20th century, the United Nations also chose this date as Women's Day in 1975, the International Year of Women, and in 1977 this date was also officially recognised. 

The week of 7 and 8 March thus offers the opportunity to take another look at developments on equal pay in Germany in 2023. 

In 2022, it was again the case that men and women did not receive the same gross hourly wage. The Federal Statistical Office found that the gross hourly wage of women was on average EUR 20.05, whereas the gross hourly wage of their male colleagues was EUR 24.36. Reliable statistics on the third gender can hardly be found. 

This means that the unadjusted gender pay gap in Germany remains at 18%. According to the Federal Statistical Office, 63% of the unadjusted gender pay gap can be explained by so-called "known" causes, which include three main reasons for the pay gap. On the one hand, this is due to the fact that women are more often employed in sectors where pay is lower regardless of gender, whereby at this point it can be questioned from a socio-political point of view what the background could be that sectors that are largely dominated by female workers are paid less overall. Furthermore, the lower pay is also due to the fact that significantly more women than men work part-time and part-time employees receive lower hourly wages on average than full-time employees. Part-time work leads to lower hourly wages especially in professions where wages increase disproportionately with the number of hours worked, such as in the insurance and financial sectors. Finally, family-related career interruptions mean that when employees return to work they cannot match the salary levels of other employees or their own income before the interruption. Career interruptions thus lead to a wage cut, while continuous employment leads to continuous growth. Since women, statistically speaking, accept a family-related career interruption much more often, this also contributes to the unadjusted gender pay gap. On the other hand, the remaining 37% of the difference in earnings, which represents the adjusted gender pay gap of 7%, cannot be explained by the scientific data available to the Federal Office. At this point, we can only make assumptions about the reasons for the difference in pay. In addition to overt and covert discrimination, individual circumstances of the individual case as well as gender-specific tendencies (e.g. in negotiating behaviour) may also come into consideration. 

Even though it is positive to note that the gender pay gap has fallen from 23% to 18% in 2022 since the first survey in 2006, there is still a significant difference that should be counteracted vigorously in the coming years. The following article will therefore take a brief look at two decisive rulings of the last 12 months on the topic of equal pay: 

No entitlement to payment of the difference in remuneration in the context of a constitutional complaint

The constitutional complaint of a renowned ZDF reporter caused a media stir in the summer of 2022. 

She suspected that her male colleagues would receive more pay than she did and therefore filed a two-step complaint with the Berlin Labour Court. First, she asserted a claim for information under the Pay Transparency Act (Entgelttransparenzgesetz "EntgTranspG") and, in the second step, demanded compensation payments as a result of the unequal pay. Both the Berlin Labour Court (case no. 56 Ca 5356/15) and the Berlin-Brandenburg Regional Labour Court (case no. 16 Sa 983/18) dismissed the reporter's claim on the grounds that a freelancer cannot assert a claim for information under the Pay Transparency Act. As a freelancer and thus "merely" an employee-like person, she was not an employee within the meaning of Sec. 5 of the Pay Transparency Act. Instead of the personal dependency that characterises the employment relationship, there is only an economic dependency in the case of employee-like persons, which would not justify a claim for information under the Pay Transparency Act. The courts emphasised that even an interpretation in conformity with EU law could not lead to a different result. Furthermore, both courts assumed that discrimination was not recognisable anyway, as the collective agreements on which the remuneration was based were not linked to gender, but to objective factors. In addition, the plaintiff's claim that vacancies were not advertised did not indicate discrimination, as it affected women and men equally. The Berlin-Brandenburg Regional Labour Court allowed the appeal only with regard to the claim for information, not with regard to the claim for compensation. 

The plaintiff was then able to achieve a partial success before the Federal Labour Court (Federal Labour Court dated 25.06.2020 – case no. 8 AZR 145/19) as early as 2020, as the Federal Labour Court – contrary to the previous instances – ruled that freelancers also have a right to information under the Pay Transparency Act. In particular, the Federal Labour Court held that the term "employee" under Sec. 5 para. 2 no. 1 of the Pay Transparency Act should not be interpreted narrowly according to a purely national legal understanding, but in conformity with EU law and with the concept of "employee" in the Equal Treatment Directive, according to which employee-like persons can also be employees within the meaning of Sec. 5 para. 2 no. 1 of the Pay Transparency Act. The Federal Labour Court made it clear here that a different (i.e. narrower) interpretation would mean that the equal treatment of male and female employees in terms of pay for the same work or work recognised as being of equal value was not adequately ensured by German law. In enforcing the plaintiff's claim for information, it then turned out that the plaintiff's male colleagues earned EUR 800 more per month than the plaintiff –  even without including bonuses, which were also not paid to the plaintiff – so discrimination was quite obvious.

Subsequently, the plaintiff first attempted to have the corresponding difference in remuneration paid by way of a non-admission appeal before the Federal Labour Court and, when this appeal failed, by way of a constitutional complaint before the Federal Constitutional Court.

However, the Federal Constitutional Court did not even accept the constitutional complaint for decision, as it considered it inadmissible (Federal Constitutional Court dated 1 June 2022, case no. 1 BvR 75/20). Even if this sounds like a failure at first, it is not the case. Indeed, the Federal Constitutional Court's reasoning did not refer to the lack of discrimination or a lack of a basis for a claim; instead, the court referred to the fact that the complainant had not complied with the principle of subsidiarity under Sec. 90 para. 2 sentence 1 of the Federal Constitutional Court Act (Bundesverfassungsgerichtsgesetz "BVerfGG"). According to the principle of subsidiarity, a violation of fundamental rights must first be remedied by the specialised courts. According to the Federal Constitutional Court, after the complainant had been informed about the comparative pay of her male colleagues, she could now bring an action for payment before the Labour Court. 

The reporter has already followed this advice in the meantime. The Society for Freedom Rights informed the press that a claim for payment had already been filed at the Berlin Labour Court on 1 December 2022.

The decision of the Federal Labour Court already sets an important course for the implementation of pay transparency and equal treatment in Germany. The relevant legal literature rightly points out that the decision not only creates the appropriate clarity, but is also legally consistent with regard to the interpretation of the general principle of equal treatment. In particular, it should be noted that there is also a high degree of economic dependence in the case of employee-like self-employed persons, which leads to a need for protection with regard to pay transparency between the sexes. Thus, the decision of the Federal Constitutional Court in 2022 does not represent a setback for the ruling of the Federal Labour Court in this respect. Instead, the Federal Constitutional Court merely referred the complainant to the correct legal process, but did not fundamentally cast doubt on her existing legal entitlement to compensation payments. It is to be hoped that such landmark decisions will lead to more employees – especially female employees – making use of their right to pay transparency.

Federal Labour Court: Negotiating skills do not justify discrimination in pay between women and men

In a much-noticed ruling from February 2023, the Federal Labour Court (case no. 8 AZR 450/21) recently clarified that the private autonomy of employers is also limited by the equal pay principle. Accordingly, employers cannot justify the lower remuneration of a woman for the same or equivalent work compared to a male colleague solely on the grounds that a male employee had demanded more pay – i.e. had simply negotiated better. 

Even if the full reasons for the decision are not yet available, the following can at least be summarised for this ruling in advance.

The plaintiff was a sales representative who had been employed by the defendant since March 2017. In the first 17 months of her employment, the plaintiff had received a basic salary of EUR 3,500. As of August 2018, her remuneration was based on a company collective agreement, which provided for a basic salary of EUR 4,140 in the remuneration group relevant for the plaintiff. However, the company collective agreement also contained a cap provision according to which the adjustment of the previous remuneration to the new collectively agreed remuneration was only to take place gradually by a maximum of EUR 120 gross per year. In application of this provision, the defendant paid the plaintiff a basic salary of EUR 3,620 gross as of August 2018, which was to be further increased in annual steps. In addition to the plaintiff, two male employees were employed as sales representatives in the defendant's sales department. One of these two employees – like the plaintiff – had been hired at the beginning of 2017. The defendant had also initially offered him a basic salary of EUR 3,500.00 gross. However, he had already rejected this during the salary negotiations and demanded EUR 4,500 gross instead. The defendant agreed to the demand and structured the employment contract that was then concluded in such a way that the employee was to be paid a higher basic salary of EUR 4,500.00 in the first ten months of his employment (January - October 2017) and a basic salary of EUR 3,500.00 plus a performance-related remuneration component in the period thereafter (from November 2017). In addition, the male employee was given the prospect of moving to a managerial position that would become vacant and an increase in the basic salary to EUR 4,000 was agreed as of 1 July 2018. In application of the company collective agreement that took effect from the following month, the male employee was finally paid EUR 4,120 gross as of 1 August 2018.

The plaintiff had first unsuccessfully sued before the Dresden Labour Court (case no. 5 Ca 638/19) and then before the Saxony Regional Labour Court (case no. 1 Sa 358/19) for payment of the difference in remuneration from the past in the total amount of EUR 14,500 as well as for payment of appropriate compensation due to unjustified discrimination in the amount of at least EUR 6,000. However, the Regional Labour Court followed the defendant and rejected the claim on the grounds that the employer's interest in recruiting employees was an objective criterion that would justify the unequal pay. 

The Federal Labour Court, on the other hand, largely agreed with the plaintiff and granted her a claim under Article 157 TFEU, Sec. 3 para. 1, Sec. 7 of the Pay Transparency Act for payment of the same remuneration as that of her male colleague. The plaintiff had been discriminated against because of her gender. Since the plaintiff had received a lower basic wage than her male colleague for the same work, it had to be presumed on the basis of Sec. 22 General Act on Equal Treatment (Allgemeine Gleichbehandlungsgesetz "AGG") that the discrimination had taken place on the basis of gender. The defendant employer had not been able to rebut this presumption. In particular, it could not rely on the fact that the pay discrimination was based on the fact that the male colleague had negotiated a higher pay. Whether the Federal Labour Court had numerous statistics in mind when deliberating, according to which female employees often have a greater reluctance to demand salary increases, can only be assumed. 

After the ruling was announced, the Society for Freedom Rights, which had supported the plaintiff, described it as a "milestone" on the way to equal pay for women and men, which was long overdue at the present time. What consequences the decision will actually have in practice remains to be seen. It is possible that, in the future, favorable negotiated salary increases of individual employees will lead to increases in the salaries of all comparable employees of the same employer. This will probably only be determined in detail by the interpretation of the labour courts. For example, the question arises as to how decisive the simultaneous hiring of the employees concerned in the present case was for the decision of the Federal Labour Court, so that the argument of length of service could play a greater role in questions of salary inequality in the future. Nevertheless, the ruling sets a groundbreaking step for a higher effort of justification by the employer in the case of salary inequalities in the future.