Equal pay does not automatically mean top pay

Authors: Verena Braeckeler-Kogel, MAES (Basel) and Meike Christine Rehner

The Baden-Württemberg Regional Labour Court has ruled that, whilst the higher remuneration of a single comparator of the other sex may give rise to a presumption of gender-based pay discrimination, the employer may rebut this presumption by demonstrating objective criteria, meaning that the employee is not automatically entitled to the remuneration of the highest-paid comparator.

 

The question of the appropriate comparison standard is playing an increasingly important role in pay discrimination proceedings. Employees may base their claims on comparisons with individual colleagues who are paid more. This raises the practical question for employers as to whether merely naming a single top earner could result in that person’s pay level becoming the benchmark for a pay claim.

The Baden-Württemberg Regional Labour Court has now provided important clarifications on this matter. Whilst the higher pay of a single comparator of the other sex may still give rise to a presumption of gender-based discrimination, this does not automatically result in a right to have one’s pay increased to that level. In the court’s view, it remains possible to challenge this presumption based on objective and gender-neutral factors, such as relevant professional experience or remuneration-related seniority.

 

Background

The female claimant held a management position at the same hierarchical level as several male colleagues. One of these colleagues was one of the highest-paid employees within the comparator group. Within her own comparator group, her remuneration was at the lower end of the scale. The claimant alleged that she was being disadvantaged based on her gender and sought to have her remuneration equalised with that of the high-earning male colleague. In the alternative, she demanded the difference between her remuneration and the median pay of the male comparator group.

The Regional Labour Court confirmed a payment claim for the difference between the claimant’s remuneration and the median pay of the male comparator group, as the employer was unable to objectively justify this difference. However, the court rejected a claim for adjustment to the highest level of pay within the comparator group.

 

Key Issues

According to the court, comparison with a single colleague can be sufficient to establish a presumption of gender-based pay discrimination. However, at least when reviewing whether the employer can rebut this presumption, the remuneration structure of the entire comparator group as well as other objective and gender-neutral criteria may be taken into consideration, provided they can reasonably explain the specific pay difference.

In the case at hand, both the female and the higher-earning male employee had been promoted to the relevant management level in the same year. However, due to the claimant’s parental leave, which lasted several years, and her subsequent part-time work, her male comparator had accumulated significantly more professional experience at that management level. The court regarded this as an objective, gender-neutral reason for the higher remuneration.

On the other hand, general references to performance, collaboration or work experience were not sufficiently convincing to the court. Successfully rebutting the presumption of gender-based pay discrimination requires verifiable and substantiated facts that can specifically explain the difference between the individual’s pay and the median pay.

 

Practical Point

• The reference to a single, better-paid colleague in the relevant comparator group may still give rise to a presumption of gender-based pay discrimination. However, this does not automatically entitle the employee to that specific level of pay if the employer can justify the different remuneration amounts based on objective criteria such as relevant professional experience or remuneration-related seniority.
• Employers should make sure that remuneration decisions are documented based on well-defined criteria. In particular, these include relevant professional experience, level of responsibility and remuneration-related seniority.
• The remuneration structure of the entire comparator group may help to rebut the presumption of discrimination, but it does not replace a clear and comprehensible explanation of the specific pay gap.
• General references to performance, market value or cooperation are generally insufficient. What is required is verifiable evidence that explains the disputed difference in remuneration.
• In light of the EU Pay Transparency Directive and its pending implementation in Germany, the documentation of remuneration criteria is becoming increasingly important. Companies should already be reviewing whether their existing remuneration systems are transparent and whether different pay levels can be justified in a clear and comprehensible manner.