On July 6, 2021, the Entgelttransparenzgesetz celebrated its fourth birthday. The aim of the Pay Transparency Act is to enforce the requirement of equal pay for women and men for the same or equivalent work and thus to eliminate existing pay differences in connection with the much discussed “gender pay gap”. The starting point is to remove taboos on the subject of pay at the workplace, make pay structures more transparent and thus create the basis for law enforcement. Even before it came into force in the last stage of the 18th legislative period, the law was subject to fierce criticism. The first evaluation in 2019 also yielded an ambivalent interim result, in which, above all, the low level of awareness of the law and the associated importance in corporate reality were determined.
The law gained new attention in German labor law at the beginning of the year with a ruling by the Federal Labor Court, in which the Federal Labor Court confirmed that the information obtained from employees under the Pay Transparency Act can form the basis of the rebuttable gender presumption. discriminatory remuneration. As the Handelsblatt also reported on May 29, 2021, the application of the law has so far not played a major role in the day-to-day business of many companies. In other countries, for example in Great Britain or the USA, however, this topic is receiving significantly more attention. However, the topic of wage transparency is not very popular in Germany due to the often feared disturbance of the peace at work. This could change in the future, because on March 4, 2021, the European Commission presented a proposal for a new directive in the scope of the German Entgelttransparenzgesetz (Entgelttransparenzgesetz), which in many places contains stricter requirements than the current German law.
The new proposal for a directive
On March 4, 2021, the European Commission proposed a directive to strengthen the application of the principle of equal pay for men and women for the same work or work of equal value through pay transparency and enforcement mechanisms (EntgTranspRL-V). The proposal still needs the approval of the European Parliament and the Council of the European Union. So far, the European Union has only issued a non-binding recommendation for pay transparency regulations from 2014.
Contents of the guideline and differences to the Entgelttransparenzgesetz
In many places, the guideline tightens regulations that are also contained in the Entgelttransparenzgesetz (Entgelttransparenzgesetz). In some cases, however, it also creates completely new requirements.
Pay transparency for applicants
Article 5 of the directive provides that job applicants have the right to obtain information from future employers about the starting salary for the job in question or the scope of the job. This information must already be provided in a published job advertisement or made available to applicants without being asked before the interview. On the other hand, the popular question in job interviews about the salary in the previous employment relationship should be expressly forbidden. The guideline thus has a larger scope in terms of time and content, which extends into the phase prior to the establishment of the employment relationship and can have considerable effects on the recruitment practice of companies.
Individual right to information
The Pay Transparency Act also provides for an individual right to information. According to Article 7 (1) of the Pay Transparency Directive (EntgTranspRL-V), employees will in future have the right to request information about their individual income and average income, broken down by gender and for employees in the comparison group. It is unclear whether the current German regulation, which provides for the specification of median average salaries, is already sufficient in this regard. In terms of definitions, the guideline differentiates between “average income” and “median income”. According to Article 7 (2) of the Directive, the employer is also obliged to remind the employee of such a claim annually. This means that there is a new obligation to actively work towards the actual exercise of the claim.
Reporting on the gender pay gap
Art. 8 of the guideline also provides that employers with at least 250 employees must report annually on their website or in another publicly accessible form on the wage gap between employees. Whether this obligation is met should be monitored by a body to be appointed by the respective member states. In Germany, the Federal Anti-Discrimination Agency is a possible candidate. However, information on the pay gap between workers by group of workers doing the same work or work of equal value need only be provided internally. Here, too, employers are obliged to be extremely transparent when setting wages.
If the report shows a difference in average income of at least five percent and the employer cannot provide an objective and gender-neutral justification, a joint remuneration assessment must be carried out with the employee representatives according to Art. 9 of the directive. In addition, a remedy must then be found by introducing a gender-neutral job evaluation and job classification.
Strengthening equality bodies and employee representatives
In addition, the proposal for a directive also provides for the support options of recognized equality bodies and employee representatives to be strengthened. According to Article 13 of the directive, these bodies should act on behalf of or in support of the workers concerned with their consent. This also applies to several affected employees at the same time. According to the explanations in the proposal for a directive, this is intended to overcome procedural and cost-related obstacles to bringing legal action for affected employees.
Claim for damages
If employees have suffered damage as a result of the violation of rights or obligations in connection with the principle of equal pay for work of the same or equivalent value, they are entitled to compensation under Article 14 of the Directive. It is rather unlikely that this claim will essentially go beyond the claims already provided for in § 15 AGG. It should be noted, however, that the guideline prohibits the limitation of the entitlement by an upper limit – such an upper limit has so far only been provided in German law in the event of non-employment because of (gender) discrimination.
Shifting the burden of proof
The reversal of the burden of proof provided for in Article 16 of the Directive could be important and interesting for employees in the future: If there is prima facie evidence of pay discrimination, it is up to the employer to rebut this presumption. The same applies if employers violate rights or obligations in connection with pay transparency.
Sanctions
While the provisions of the Entgelttransparenzgesetz have so far offered little incentive for companies to implement them and actively promote equal pay, this could be done through the sanctions of Art. 20 of the Pay Transparency Directive. Violations of rights and obligations in connection with the equal pay law are to be punished with fines. Repeated violations result in the withdrawal of public services or the exclusion from the granting of financial incentives for a certain period of time. According to Article 21 of the directive, the member states should also examine how compliance with the principle of equal pay can be ensured when executing public contracts and concessions. In this respect, an exclusion from participation in procurement procedures can also be considered.
Conclusion – what companies need to be prepared for
As has been shown, there is a need for improvement in the Entgelttransparenzgesetz with regard to the requirements of the proposed directive. Employers should therefore be prepared now that they will be confronted in the foreseeable future with further obligations with regard to the creation of pay transparency and the enforcement of pay equality. In addition, the possible sanctions in the event of violations must be taken into account when dealing with these issues in the future. In addition, not only does the risk of litigation increase, but also the burden of proof lies with the employer.
At the same time, however, companies currently have the opportunity to act with foresight, to review their own remuneration systems in good time before changed legal regulations come into force and thus to identify any need for adjustment. We carry out such “wage audits” on a regular basis. In addition to the legal side, this also offers opportunities to position yourself as an attractive employer in the market.
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