Pay discrimination based on a pair comparison – consequences of the Federal Labour Court’s decision

On 23 October 2025, the Federal Labour Court (Bundesarbeitsgericht, BAG) broke new ground in a case concerning an employee's claims to remunerate the difference in pay due to gender discrimination. Contrary to the legislature’s intention, it is not a group comparison that is decisive, but a 1:1 pair comparison for determining possible discrimination.

"Significantly more legal risks, financial implications and a high administrative burden for companies" is the initial conclusion drawn in the days following the BAG’s ruling of 23 October 2025 (case No. 8 AZR 300/24) on the enforcement of claims to remuneration of the difference in pay due to gender discrimination.

In the press release available to date, the BAG states that, in order to presume a case of gender-based pay discrimination, it suffices if the employee represents and proves that the employer pays a higher salary to another colleague who performs the same or equivalent work (known as a pair comparison). This presumption then has to be refuted by the employer.

The Regional Labour Court (Landesarbeitsgericht, LAG) of Baden-Württemberg took a different view in its ruling of 1 October 2024 – 2 Sa 14/24. The court ruled that a strong likelihood of gender-based discrimination is required for a successful equal pay claim. This is not the case if only one single person of the opposite sex is named as a comparison. In its press release, the BAG emphasised that neither the size of the male comparison group nor the median remuneration of both gender groups was relevant for the presumption to apply. For this reason, a better-paid colleague – in this case a male colleague – could also be used as a comparison person. In this context, the employee made reference to the company's internal dashboard, which is used on the intranet to provide information in accordance with the German Pay Transparency Act (Entgelttransparenzgesetz, EntGTranspG). This enabled her to present sufficient facts for the presumption of gender-based pay discrimination.

If the employer is then unable to refute the presumption of gender-based discrimination resulting from such a pair comparison, it is obliged to pay the remuneration it paid to the colleague used in the comparison – i.e. make an adjustment to the highest amount. It is therefore not sufficient to simply compensate the median pay gap of the male comparison group. The BAG bases its ruling on the case law of the Court of Justice of the European Union (see ECJ, judgement of 26 June 2001 – C-381/99 [Brunnhofer]). The case was referred back to the LAG Baden-Württemberg for a new hearing and decision, giving the employer the opportunity to refute the presumption of gender-based pay discrimination on the basis of objective criteria.

The decisive and guiding factor for many companies will now be the extent to which "performance", i.e. the assessment of performance, is sufficient to justify low pay. The employer had argued that the plaintiff's performance was "below par". The LAG Baden-Württemberg has thus far considered this to be unsubstantiated and therefore did not take it into further account. This makes it all the more important that the court clarifies this very point: can individual performance really be stated as the reason for different remuneration?

The decision sends an important signal to companies to adjust their existing salary systems before the EU Pay Transparency Directive is implemented and comes into force, and to document salary differences accordingly. The following points are recommended:

• Documentation of the median salary: Including individual salary components of the comparison group in order to respond to any requests for information. This is because the upstream right to information, which leads to equal pay lawsuits, currently still specifically extends to the static median of comparable employees of the opposite sex under the German Pay Transparency Act.
• Documentation of the comparison group for a pair comparison: We also recommend adequately documenting the individual comparison groups. According to the BAG’s present decision, an extension of the information rights to also cover individual remuneration cannot be ruled out, even if the plaintiff in this case benefited from the company's internal dashboard.
• Documentation of the individual reasons for paying different salaries: Reasons such as the tense market situation, the recruitment of employees or professional qualifications, and certain areas of responsibility can be given. Appropriate documentation is essential, especially when using salary bands. This is because, even in these cases, the position within the band may be justified by objective reasons. However, even if there are objective criteria for gender-related salary differences, these must be sufficiently demonstrated in the event of a dispute if the presumption of gender-related pay discrimination is to be refuted.
• Threat of equal pay lawsuits: If, as in this case, a female employee successfully claims gender-based pay discrimination in relation to the top earner, it is very likely that her male colleagues in the comparison group will file similar equal pay lawsuits in light of the remuneration of their successful colleague. The decision covers gender-based pay differences for both men and women.
• Review of variable remuneration systems: Do these contain objectively gender-neutral, comprehensible criteria, and can any subjective assessments be measured in a comprehensible manner? In its press release, the BAG also states that the defendant's remuneration system is not transparent.

Use adjustments to prepare for the EU Pay Transparency Directive:

• Employers should already adjust their existing remuneration structures with a view to the EU Pay Transparency Directive, they should set up comparison groups and document the objective criteria for differentiation (skills, workload, responsibility, working conditions) in each individual case.
• It is quite possible that the German legislature will take the present decision as an opportunity to extend the right to information under the Pay Transparency Directive beyond the average remuneration of both genders, as provided for in Article 7, to include individual remuneration for a pair comparison. Here as well, good preparation pays off.

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