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Chasing the unicorn or how to argue gender discrimination based on unequal payment
In July 2017, the Equal Pay Act was passed but a six-month waiting period applied before individuals could exercise any right under this Act. Now almost two years since the Act itself entered into force, the first court judgments have been handed down. These have made it difficult for employees to prove 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 begins: Employees, who are under the impression that their (male) colleagues earn more money than they do, can request payment information from their employer. Such information requests 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 respectively her salary and therefore request an adjustment. Here the Higher Labour Court of Lower Saxony stated in its decision of 1 August 2019 (5 Sa 196/19) that such information alone is not sufficient to show discrimination and dismissed the action entirely. The underlying reason was that the employee was unable to show a pay disadvantage. The legal basis for the adjustment of remuneration is controversial and has been criticised in the case law and literature. The Higher Labour 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 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 discrimination based on gender. The court did not see this. The employee's salary was below the median, but this information alone was not sufficient to justify a finding of discrimination. This information neither shows how the remuneration of the employee's own - here female - gender is made up nor is there any evidence of discrimination 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 Labour Court of Rhineland-Palatinate, Judgment of 11 October 2018 – 5 Sa 455/15), the Court ruled that the employer will meet its burden of proof and show that it has not violated the principle of gender discrimination by showing that only non-gender-related reasons lead to different remuneration. This was again an argument also used by the Higher Labour Court of Lower Saxony. The employer had argued in favour of differentiation of remuneration and also managed to prove that the highest salary in a comparison group was earned by a female employee.
Remuneration under the median as an indication
Already during the implementation of the Equal Pay Act, the legal literature criticised that the sole use of the information obtained from the inquiry would not be sufficient to meet the burden of proof. The intention of the Equal Pay Act was, however, to allow the employee to use the information obtained and argue both – a disadvantage in the difference in remuneration and discrimination. Therefore, this is all the information the employee receives using the instrument provided in the Equal Pay Act.
If a court now rules that remuneration below the median is not alone sufficient to argue discrimination, it confirms at the same time that the Equal Pay Act does not live up to intentions. 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 the court has now decided that the mere difference in remuneration is not sufficient, it is not recommended that employees bring 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 favour. Any additional information, which indicates discrimination, would be helpful here. Once the burden has shifted to the employer, it has to be proven to the court that the remuneration is not based on gender but non-discriminating factors.
Consequences for employers
Whilst employers could now be under the impression that the potential danger posed by the implementation of the Equal Pay Act is off the table, simply not replying to any information request made by employees is not the answer. ‘Playing dead’ and relying on the above-mentioned Court ruling could therefore also be considered an indication of discrimination. Therefore, information requests must be treated with care and respect for the potential consequences resulting from them.
In addition, employers must begin to set up a remuneration 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. The case law allows for the distinctions made in the past to be remedied if the employer shows that the ultimate goal is to establish a non-discriminatory system eventually.