• Insights

The European Court of Justice rules on the gender pay gap and equal pay

Written by
Kliemt.HR Lawyers, the first port of call in employment law for top-class and future-proof advice.
Authors
Daniela Quink-Hamdan
Kliemt.HR Lawyers
Germany
23.07.21
3
The European Court of Justice ruled on 3 June 2021 that female shop assistants working for the supermarket group Tesco in the UK were entitled to challenge the difference in pay with their male colleagues in distribution centres under EU equal treatment law. Ius Laboris German firm Kliemt.HR analyses the ruling.

Equal pay for women and men remains a sensitive issue; compounded by the existence of the gender pay gap and difficulties in providing evidence on pay disparities. Legally, several questions remain unanswered: does the work have to be ‘equal’ or is work of ‘equal value’ sufficient to demand equal pay? Can workers also directly invoke Article 157 of the Treaty on the Functioning of the European Union (TFEU)? Some of these questions were answered by the European Court of Justice on 3 June 2021.

According to Article 157 TFEU, each EU Member State must ensure the application of the principle of equal pay for men and women for equal work or work of equal value. According to the European Court of Justice, this is one of the founding principles of the EU. Therefore, according to the judgment (C-624/19), employees can directly invoke the EU law principle of equal pay in disputes between private parties for both ‘equal work’ and work of ‘equal value’.

The background

In this legal dispute, numerous female employees working as sales assistants at the British supermarket chain Tesco took legal action against the company. The female shop assistants claimed before the responsible British Employment Tribunal that they were entitled to the same pay as the (male) employees working in sales departments, i.e. in a different part of the supermarket group. In essence, they argued that not paying them equally, even though they performed comparable work, was contrary to Article 157 TFEU and thus to the principle of equal pay for men and women.

The company replied that the female shop assistants worked in the shops while their colleagues in the sales department work for another part of the Tesco group, only performing ‘equivalent work’. Consequently, the female employees could not invoke the EU principle of equal pay. Article 157 TFEU had no direct effect in this respect. Moreover, Tesco Stores could not be regarded as a ‘single source out of one unit’. That means, it was not a single entity setting the pay of both groups of employees.

The UK Employment Tribunal referred the case to the European Court of Justice for clarification. Despite Brexit, the European Court of Justice retained jurisdiction over the already pending case and issued its decision on 3 June 2021.

The European Court of Justice´s decision

The ECJ essentially made three key statements. Firstly, according to the Court, female employees can also invoke the EU law principle of equal pay between men and women if they claim to perform ‘work of equal value’. This is because Article 157 TFEU is directly applicable which means the ones affected can directly invoke it before national courts, even in legal disputes between private parties. Thus not only are Member States obliged to ensure equal pay, but individual employers are also bound by this principle.

Secondly, the principle of equal pay is mandatory for men and women, i.e. for both equal work and work of equal value.

Thirdly, the scope of Article 157 TFEU is affected in principle if the work of equal value is performed in different establishments of the same employer. The only decisive factor was that the different salary could be attributed to one and the same source as a unit, because in this case, the work and the salary of these employees could be compared. If, on the other hand, the unequal treatment was due to the absence of such a unit, no discrimination could be considered because of the lack of comparability.

It is not the European Court of Justice but the referring UK Employment Tribunal that decides on the concrete fate of the female saleswomen and the answer to these questions in this individual case. The European Court of Justice nevertheless paved the way for the female shop assistants: It basically confirmed their view that working in different establishments does not prevent the right to equal pay. The UK Employment Tribunal will now have to answer the questions of whether the work of the female shop assistants is in fact ‘work of equal value’ compared to that of their colleagues in sales department and whether Tesco Stores is a ‘single source’ (this latter is likely to be answered positively).

Practical significance

The European Court of Justice’s decision means a further step towards equal pay between men and women. The Court has clarified that (female) employees can directly invoke Article 157 TFEU before national (and thus also German) courts and demand equal pay for equal work or work of equal value. Some questions still remain as to what concrete requirements apply to demonstrating the existence of ‘work of equal value’ and a ‘single source’, for example in corporate group structures.

 

In cooperation with Jana Schön, research assistant in the Berlin office.