The application of a simplified burden of proof to claims under the Wage Transparency Act by case law makes it difficult for employers to refute an alleged ‘gender pay gap’. The most recent Labour Court rulings clarify the important principles and provide a roadmap for what precautions companies can – and should – take with regard to pay transparency and equity.  

The Wage Transparency Act came into force in 2017. The stated aim of the law is to eliminate direct and indirect pay discrimination based on gender. A central mechanism of the Act is the right to information, which enables employees to receive information about the organisation’s pay structures.  

In accordance with the purpose of the Act, the right to information is designed as a first step before enforcing the right to equal pay for men and women. It is intended to make it easier to enforce the right to equal pay. In this context, the question arises as to whether a difference in pay disclosed by this information indicates discrimination on the basis of gender and who bears the burden of proof in the context of an equal pay claim. 

According to Wage Transparency Act (and EU law), women and men must be paid equally for equal work or work of equal value. Discrimination on the basis of gender with regard to pay components and conditions is prohibited. Accordingly, lower pay may not be paid for equal work on the basis of gender. 

In the event of pay discrimination, the employees affected are entitled to an adjustment of their pay. 

If the information disclosed by the employer shows that an employee’s salary is below the median of the comparison group of the other sex, according to general principles of evidence, the burden of proving gender discrimination would initially be on the employee. 

The Wage Transparency Act does not contain any special provisions on the burden of presentation and proof. However, the courts have applied the General Equal Treatment Act, which provides for a reduction in the burden of proof for the plaintiff, to equal pay claims. Under this rule, if an employee can provide evidence of discrimination, the employer must provide objective and factual reasons for the different treatment that are not based on gender. 

In theory, the following conditions must be met for the relief from proof to apply: 

• Level 1: Existence of discrimination. First, the employee must prove that he or she has experienced worse treatment (lower pay) in a comparable situation (same/comparable work). 

• Level 2: Evidence of causality. The employee must provide evidence that suggests discrimination based on gender. This evidence must suggest the probability of discrimination, but does not need to provide full proof. 

In practice, however, both the Federal Labour Court and the European Court of Justice allow a presumption of discrimination based on gender (i.e. presumption of causality) if an employee proves that he or she earns less for the same work than a colleague of the opposite gender. In this case, according to the courts, there is discrimination that can only be explained by the difference in gender, and this presumptive discrimination must be justified by the employer. 

A regional Labour Court deviated from this conclusion in a recent decision. It pointed out that the assessment of evidence is always a case-by-case examination. There are no absolute indications that trigger an ‘automatic’ probability of causality. Rather, all (not just individual) circumstances must always be taken into account. 

If the employer refutes or undermines the evidence to such an extent that the court concludes that the employee has not met the standard of significant probability, the presumption of discrimination will not be triggered. Consequently, the employer does not have the burden of proof to justify the lower pay; the examination is ended at the second stage. Therefore, a lower salary compared to the other gender group does not automatically imply gender-based pay discrimination. 

According to the court, particular consideration must be given to (i) how the individual salary compares to the median of the comparison group of the same sex and (ii) how the salary of the comparison colleague of the opposite sex compares to the median of the comparison group of his or her own sex. In the recent case, the plaintiff’s individual salary was below the median salary of both the female and male comparison groups. The court set out the following principles: 

• If, for example, a male comparison colleague earns significantly more than the median of the male comparison group, this indicates that the pay differences are not based on gender.  

• In the event of a breach of the principle of equal pay, the claim can only be aimed at eliminating the unequal treatment and cannot seek to improve the employee’s situation compared to other members of their own comparison group. 

• A difference from the median wage of one’s own gender cannot be the basis of a gender pay discrimination claim. 

• The claimant can seek a relative increase in remuneration based on the difference between the median of the male comparison group and the median of the female comparison group. 

Pay differences must be justified objectively and in a gender-neutral manner (e.g. quality of work, professional experience or length of service). Despite the employer-favorable deviation from the highest court rulings by the recent regional court decision, the general principle remains: the basis for a pay equity claim lies in the collective comparison of two groups of employees of different genders. The deviation can only be refuted by circumstances that affect the entire group.  

Employers should therefore: 

• document all decisions regarding salary determination and adjustment with reasons; 

• be aware of salary differences within the organisation (this is the only way to respond appropriately to future claims); 

• regularly evaluate salaries and remuneration systems, and in particular have them subjected to a legal review and adjusted if necessary; and 

• follow developments in case law or obtain appropriate external expertise in a timely manner.