Introduction

At the beginning of 2017 the Federal Cabinet passed the Act on Advancing the Transparency of Remuneration Between Women and Men (the Transparency of Remuneration Act). The act is supposed to come into force before Summer 2017.

The highly controversial preliminary ministerial draft originally presented by the Ministry for Family Affairs was revised on several occasions. The requirement that the minimum remuneration be stated when advertising a position and an additional codetermination right when "implementing measures in terms of actual remuneration equality between women and men" were omitted and not replaced. Small and medium-sized companies are also no longer addressees of the adopted act.

Statutory changes

Individual right to be informed Under the new act, all employees have a claim against their employer to be paid the remuneration that would have been paid if they had not been directly or indirectly disadvantaged with regard to remuneration based on their sex. The regular three-year limitation period pursuant to Sections 195 and 199 of the Civil Code applies in this respect. The employer's retroactive payment obligation is expressly intended. At the same time, arrangements in employment or collective bargaining agreements that provide for shorter preclusion periods for mutual claims are invalid.

In contrast to the preliminary ministerial draft, only employees of employers that regularly employ more than 200 workers can assert the individual right to be informed. Unlike under the preliminary ministerial draft, the employee must additionally state his or her comparison group in the request. 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, the employee can have his or her remuneration compared with the average income. This involves gathering information on the criteria and procedures used to determine remuneration and also up to two remuneration components (eg, permission to use the company car for private purposes, anniversary bonuses, awards or premiums). However, average remuneration only is to be disclosed to the requester, because all employee personal data must be anonymised by the employer. The right to be informed includes only such remuneration arrangements that are applied in the same establishment and with the same employer. Regionally varying remuneration arrangements with the same employer are not included in the scope of application.

In companies bound to a collective bargaining agreement, the works council is the employees' point of contact. The works council must bundle all information requests and may inspect the employer's remuneration tables.

Owing to existing transitional provisions, 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 repeat such a request until three years later; subsequently, the request can be repeated every two years.

Business examination procedure Using business examination procedures, employers with more than 500 employees regularly in their service are requested to examine their remuneration arrangements, components and application at least every five years, regarding whether the principal of equal remuneration is complied with. The business examination procedure was omitted and not replaced for companies with a works council bound to a collective bargaining agreement. The examination procedure is also considered to be satisfied if a controlling company assumes the examination procedure on behalf of its subsidiaries. The act no longer requires that previously established remuneration concepts be approved by the Federal Anti-discrimination Agency.

Reporting duties Companies with more than 500 employees that are obliged to produce a management report pursuant to Sections 264 and 289 of the Commercial Code must report whether and how they promote women and create remuneration equality. The first report is due in 2018. Companies bound to collective bargaining agreements must report on remuneration equality and advancement of women every five years, with other large companies reporting every three years.

Key aspects for companies

The employer is obliged to provide information in accordance with Articles 11 to 16 of the act. There is no harm in preparing relevant remuneration data. If the employer does not meet the request, unequal treatment is assumed to exist. Although the employer is free to provide adequate justification for unequal remuneration, the burden of proof that reasons related to the employment market exist or that the preferred employee performs his or her work in an extraordinary manner lies with the employer.

Irrespective of this, no penalties for employers providing unequal pay were included in the act – with the exception of damage to reputation and the subsequent wage payment duty following the corresponding court decision.

The right to be informed does not apply if the work is unequal or non-equivalent. If the employer considers the activities specified by the employee not to be comparable or if the scope of activities is in practice not equal or equivalent, the employee must specify another comparable activity or provide reasons if such an activity does not exist. There is no obligation to compare various employment groups with one another. If the company is bound to a collective bargaining agreement and has a works council, only the works council can assert the employee's claim. The employer can meet this request relatively simply by referring to the provisions set out in the collective bargaining agreement.

In contrast to the previous version of the act, the employer is not obliged to immediately remedy unequal treatment based on gender, but merely to "take adequate measures to remedy such inequalities".

Based on Sections 27 and 38 of the Works Constitution Act, the mentioned 200-employee threshold creates a new threshold regarding the right to be informed, which should be kept in mind when it comes to personnel development.

For further information on this topic please contact Anke Kuhn at CMS Hasche Sigle by telephone (+49 221 7716 195) or email (anke.kuhn@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

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