German Federal Labour Court: Equal pay for equal work – Better negotiating skills do not justify a better salary

Published on 27. February 2023

Since 1979, pay discrimination on the basis of gender has been prohibited in Austria. Nevertheless, unacceptable differences in pay between women and men remain: Equal Pay Day fell on 16 February in Austria this year. On average, since the beginning of the year, women effectively worked unpaid until this day in comparison to men.

A recent German Federal Labour Court decision (BAG) (16.01.2023, AZ 8 AZR 450/21) has clarified how the law on pay discrimination should be interpreted in Germany: A man’s better negotiating skills do not constitute valid justification for receiving higher pay than a woman. Nor can a difference in pay between women and men be justified by employers claiming a special interest in retaining a certain employee.

The case concerned a female sales employee who agreed to a basic salary of EUR 3,500. A male colleague, who was hired at almost the same time, negotiated a basic salary of EUR 4,500. The female employee sued for the difference to her male colleague's salary. While the lower courts dismissed the claim, the BAG confirmed discrimination on the grounds of gender. A difference in pay for the same job can only be justified by objective, gender-neutral reasons such as qualifications or professional experience—the (better) negotiating skills of other employees are irrelevant. Therefore, the female employee’s complaint was upheld and she received compensation (non-material damages) of EUR 2,000.

This decision is not surprising in Austria: 25 years ago the Supreme Court (OGH 20. 5. 1998, 9 ObA 350/97d) ruled that lower salary expectations in the job interview are no justification for a lower salary for the same or equivalent work. Unfortunately, this clear jurisprudential line has not yet been adopted everywhere in practice.

Even though the current Federal Labour Court decision has no direct legal impact on Austria, it still offers a good opportunity to take a closer look at company salary systems in order to avoid (unintentional) discrimination. Every employer needs an objective and transparent salary system that guarantees equal pay for equal work, not only with regard to gender.

We are happy to advise and support you in implementing transparent and non-discriminatory salary systems.

Author: Mirjam Holuschka