In July 2017, the Equal Pay Act was passed but a six-month waiting period was established before individuals could exercise any right under this Act. Now almost two years after the Act itself came into force, the first court decisions have been made. Owing to those, employees have a hard time proving discrimination in pay, although all measures provided for in the law are being used.
How to argue discrimination in accordance with the Transparency of Pay Act
This is where the dilemma lies: Employees who are under the impression that their (male) colleagues earn more money than they do, can request payment information from their employer. Such an information request should – in theory – allow employees to find out whether their colleagues earn more or less money. This is where the “but” comes in: employers only need to provide the information in relation to the median of the wage components. This means the salary, which separates the upper half from the lower half and should therefore not be confused with the average remuneration.
Let’s assume such information brings to light the fact that the median is higher than what the employee who requested the information earns: the next logical and possible step would be to bring a lawsuit against the employer for comparable remuneration. The employee would then argue in court that the median is above his or her salary and therefore request an adjustment. Here the Higher Labor Court of Lower Saxony stated in its decision of August 1st, 2019 (5 Sa 196/19) that such information alone is not sufficient and dismissed the action entirely. The underlying reason was that the employee was unable to present a pay disadvantage. The legal basis for the adjustment of remuneration is controversial in case law and labor literature. The Higher Labor Court of Lower Saxony found that regardless of the legal foundation on which the claim for different remuneration was made (the Equal Pay Act itself does not provide for one), the employee needs to argue that, in accordance with the requirements of Section 22 of the General Equal Treatment Act, the information provided is sufficient to prove a discrimination due to gender. The court did not see this. The employee’s salary was below the median, but this information alone was not sufficient to justify discrimination. The information also fails to show that the level of remuneration is based on the employee’s gender – in this case, female. Nor is there any evidence based on mere information, even if the difference in remuneration were a significant amount. The very fact that colleagues earn 8% more is therefore not enough.
In another court decision (Higher Labor Court of Rhineland-Palatinate (11/10/2018 – 5 Sa 455/15) the court ruled that the employer meets his burden of proof for a lack of violation of the principal of gender discrimination, by showing that only non-gender-related reasons led to different remuneration. This was again an argument used by the Higher Labor Court of Lower Saxony. The employer had arguments in favor of differentiation within the remuneration and also managed to prove that the highest salary in such comparison group was earned by a female employee.
Remuneration under the median as an indication
Already during the implementation of the Equal Pay Act, labor law literature stated that the sole use of the information obtained from the inquiry into the employer cannot be sufficient to fulfil the burden of proof. The intention of the Equal Pay Act was, however, to use the information obtained and argue both a disadvantage in the difference in remuneration and discrimination. And therefore this is all the information the employee receives by using the instrument the Equal Pay Act provides.
If a court now rules that remuneration below the median alone is not sufficient to argue discrimination, it confirms at the same time that the Equal Pay Act does not live up to what it was intended to be. Thus, the outcome of the appeal already filed by the employee is expected to be a pioneering decision.
Consequences for employees
The underlying decision takes the bull by the horns. As now the court has decided that the mere difference in remuneration is not sufficient, it is not recommended that employees bring in a lawsuit without further information to back up their argumentation. Therefore the employee needs to present further information to shift the burden of proof in his/her favor. Any additional information which shows evidence of discrimination would be helpful here. Once the burden has shifted to the employer, it has to be proven to the court that remuneration is not granted due to gender but due to non-discriminating factors.
Within an existing system, exceptions can be argued in one way or the other.
Consequences for employers
Whilst employers could now be under the impression that the potential danger which came along with the implementation of the Equal Pay Act has subsided, simply not replying to any information request made by the employees is not an answer. Employers playing dead and relying on the above-mentioned court ruling could therefore also be considered as an indication of discrimination. Therefore, information requests must be treated with care and respect for potential consequences resulting from them.
In addition, employers must begin to set up a payment system so that transparent decisions can be taken on pay and increases in pay. Within an existing system, exceptions can be argued in one way or the other. Case law allows for the rectification of distinctions made in the past if the employer shows that the ultimate goal is to eventually establish a non-discriminatory system.