Following up our blog post from December 19, 2016 where we reported about a legislative proposal to promote equal pay between women and men, the Remuneration Transparency Act has now entered into force.

Arguing that women still earn 7 % less than men even if statistics account for women frequently working part-time, less often climbing up the career ladder and rather working in social professions with lower salaries, the German Government felt that at least larger employers (beyond 200 employed persons) should be held responsible for their actions in this context. To close the gender pay gap the two legislative chambers of Germany have now adopted the Remuneration Transparency Act (Entgelttransparenzgesetz).

For employers it is worth taking a closer look at least at three new requirements that may impact them in the future:

• employee’s individual right to information about comparable colleagues’ pay,
• request to establish internal control procedures at company level and
• obligations to publish reports on equality and equal pay.

Let’s look at the three main issues in more detail:

1. First, women and men working for employers with more than 200 employees will have an individual right to information in order to compare their proper remuneration with the one of colleagues of the opposite sex performing an equal or equivalent activity. This right to information does not allow employees however to obtain information about the exact pay of individual co-employees. It can only be asked for the criteria and procedures used for the wage-setting and the average gross monthly salary of a comparison group of at least 6 co-employees. In principle a written request may be made every two years, with an initial waiting period of six months after adoption of the Act. The employer has to respond in writing three months after receipt of the request. If he refuses to provide the required information, the employer bears the burden of proof in the event of a legal action. While the Act does not provide direct sanctions for noncompliance employees can however claim compensation of unduly denied payments on the basis of existing antidiscrimination rules (sec. 15 Equal Treatment Act / AGG).
2. Employers with more than 500 employees are moreover strongly encouraged to establish operational control procedures to verify regularly that payment structures comply with the requirement of equal pay. Even if this is not a strict legal obligation the provision may gain practical relevance as the omission to establish control procedures could become part of the evidence battle for potential claimants.
3. Employers with more than 500 employees, who are further required to publish a status report (Lagebericht) under the German Commercial Code, are obliged to combine their status report with a public report on equal pay. This report shall provide every three or five years (depending on whether the employer is bound by or applies a collective wage agreement) which measures were adopted to promote gender equality and equal pay during the last reference period and their impact. The first report has to be published within one year after the Act has come into force and shall only cover the preceding year.

The enforcement of the duties under this new piece of legislation does not provide for the usual administrative penalties. Instead, enforcement is delegated to employees who find a powerful tool to monitor their employer’s compliance with the fundamental principle of equal pay. They enjoy the reversed burden of proof if the company does not provide the necessary data or reports. It remains to be seen whether the works council bodies, which are widespread in Germany, put equal pay back on their agenda. Works councils have a general duty to ensure their company’s compliance with the law which would enable them to request reports and review information provided to individuals. Therefore it is recommended to quickly adapt relevant company structures to comply with the new requirements.

Written by Jannik Thiel and Bernd Borgmann