At the beginning of the year, the German Federal Cabinet (Bundeskabinett) passed the “Act on advancing the transparency of remuneration between women and men” (Entgelttransparenzgesetz, the “Act”). The highly controversial Act is expected to come into force before the summer break.

Key statutory changes include:

a) Individual right to be informed

The Act creates a right for individual employees, in establishments that regularly employ more than 200 workers, to be informed about the remuneration received by other employees in the same comparison group. If an employee is aware of indications that at least six colleagues of the opposite sex are paid more for the same or equivalent performance, he can have his remuneration compared with the average income of the colleagues of the opposite sex. However, the employee must state his comparison group in his request.

The right to be informed only applies to remuneration arrangements from the same establishment, the same employer and the same region. In order to protect the personal data of employees, only the average remuneration will be disclosed to the requester. In companies bound by collective bargaining agreements, the works council is the employees' point of contact. The right to be informed can be asserted, at the earliest, six months after the promulgation of the Act. Employees who request information within the first three years after the Act comes into force cannot bring another request for three years; subsequently, requests can be repeated every two years.

Disadvantaged employees may bring a subsequent claim against their employer to be paid the remuneration that they would have received if they had not been disadvantaged based on their sex. In cases where disadvantage is legally determined, employers will be obligated to make retroactive payments for the previous three years. Terms in collective bargaining agreements and working contracts that provide for shorter preclusion periods for mutual claims are invalid.

b) Business examination procedure

Employers with more than 500 employees usually in their service are invited to examine their remuneration arrangements and their application at least every five years to determine whether they comply with the principal of equal remuneration. This invitation is not intended for companies with a works council bound to a collective bargaining agreement. The examination procedure is considered to be satisfied if a controlling company assumes the examination procedure on behalf of its subsidiaries. 

c) Reporting duties

Finally, employers which regularly have more than 500 employees and are required to produce a management report pursuant to §§ 264 and 289 of the German Commercial Code, must report on steps they have taken to achieve equality and remunera-tion equality. The first report will be due for the year 2018. Companies bound by collective bargaining agreements must report every subsequent five years and all other large companies, every three years.

Important aspects for companies

Employers facing requests for information must provide information within three months of receiving notice of the request; there is no harm in preparing relevant remuneration data in anticipation of claims. If an employer does not respond timely, unequal treatment will be assumed. In all cases, employers have the burden to prove adequate justification for unequal remuneration. 

With the exception of damage to reputation and subsequent wage payment duties, which may be imposed following a corresponding court decision, the Act does not include sanctions for employers found to have unequal pay. 

Compared to the previous version, the employer is not obligated to “immediately remedy” unequal treatment based on gender, but merely to “take adequate measures to remedy such inequalities”.