INFORMATION RIGHT UNDER THE REMUNERATION TRANSPARENCY ACT
As of 6 January 2018, under the Remuneration Transparency Act [Entgelttransparenzgesetz – EntgTranspG], employees can demand information from their employer about the remuneration of colleagues of the opposite sex working in the same or an equivalent occupation. What is important and how can you keep bureaucracy to a minimum?
I. Legal Background
The core content of the Remuneration Transparency Act is the prohibition of direct and indirect salary discrimination on grounds of gender.
According to the law, direct pay discrimination exists if an employee of either sex receives a lower pay than an employee of the other sex for the same or equivalent work. The employee of the opposite sex performing the same or equivalent work is referred to as the comparator, in case of more than one comparator as the peer group.
The Remuneration Transparency Act assumes an indirect pay disadvantage if apparently neutral criteria are used which, however, may result in an employee of either sex receiving a lower pay than the comparator. The law makes an exception if the criteria are appropriate and necessary to achieve a legitimate objective. It remains to be seen which individual criteria can be used permissibly. The legislator has merely indicated that different remuneration is permissible on the basis of criteria relating to the labor market, performance and work results, provided that the principle of proportionality is observed.
If a pay disadvantage is determined, the remuneration agreement is invalid. The ineffective remuneration agreement of the underpaid employee is replaced by the remuneration agreement of the comparator, so that the underpaid remuneration is to be compensated retroactively by the employer.
II. The formal requirements for individual entitlement to information
The core of the Remuneration Transparency Act is the employee’s individual right to information pursuant to section 10 EntgTranspG. This allows the employee to obtain information on various facets of a potential unequal treatment so that he or she can review the prohibition of pay discrimination.
The right to information has to be required in writing and can only be asserted every two years. If the person entitled to information asserts his or her right to information until 6 January 2021, he or she may, in derogation thereof, only submit a further request for information after three years. Before the expiry of two or three years, the person entitled to information may only demand information if the circumstances of the employment have changed significantly. This can be assumed, for example, in the case of a change of job or in the case of promotion to a non-tariff area.
The addressee of the request for information is the employer. However, if there is a works council, the works council is obliged to provide information instead.
III. The material requirements for individual entitlement to information
The employer must clarify the content of three aspects.
1. The average gross monthly salary and the salary components
On the one hand, the person entitled to information can request information on the average monthly gross salary of the peer group. In addition, the person entitled to information may request information on up to two individual salary components of the peer group and their average amount, such as a performance bonus, a performance allowance or a hardship allowance.
The person entitled to information must name the peer group and the party obliged to provide information must check this information. If the verification shows that the peer group specified by the person entitled to information is not comparable with the occupation, the party obligated to provide information must provide the information on the basis of a peer group determined by itself. It shall also state the reasons why the peer group designated by the person entitled to information does not carry out an equivalent task but the peer group designated by itself is carrying out such tasks.
The average gross monthly remuneration of the peer group shall be expressed as a statistical median for the last calendar year. The same applies to the named salary components.
In a first step, all remuneration granted directly or indirectly in cash or in kind as a result of an employment relationship in the last calendar year must be added up for each person in the peer group. If such person is only employed part-time, the annual gross pay must be extrapolated to full-time employment. The annual gross salary achieved in this way is subsequently to be divided by the number of months the comparator worked for the company in the previous year.
From the average monthly gross salaries which are thus obtained, the median can be obtained, i.e. the median average gross salary, if the average gross salaries of the various peers are sorted by amount. If there is an even number of gross salaries, then the average of the two intermediate gross salaries should be used as the median.
In the same way, the average monthly amount of the named salary components in the peer group shall be determined.
2. Information on the criteria and procedures for determining its remuneration
In addition, information on the criteria and procedures for determining the remuneration of the person entitled to information and that of the peer group shall be provided to the person entitled to information. If the criteria and procedures for determining the remuneration are based on statutory provisions or collective bargaining agreements, it is sufficient to mention these provisions and where they can be inspected.
3. Allocation of comparable occupations by sex
Lastly, the party obliged to provide the information must state to what extent the designated comparative activity in the enterprise is predominantly carried out by employees of the opposite sex.
The right to information is subject to numerous restrictions:
On the one hand, the right to information exists only for employees in companies with more than 200 employees with the same employer.
In addition, there are data protection concerns about information provided for a small peer group. This is most apparent when only one comparator is employed in a company. By means of the right to information, the person entitled to it could directly obtain information on the actual income of this comparator. In order to avoid such conclusions, information on the average monthly salary of the peer group and its components can only be requested if the peer group consists of more than six persons.
V. Legal consequence of incorrect information
If the information is not or not completely provided, the person entitled to the information can enforce the claim in court. Moreover, in the event of a dispute, the employer would bear the burden of proof that there has been no breach of the prohibition of pay discrimination. The person entitled to information could also be entitled to compensation and damages under the General Equal Treatment Act.
VI. Handling by the employer
If a request for information is made, the party obliged to provide the information should observe the following in order to keep the bureaucratic effort as low as possible.
The first step is to check whether the necessary minimum number of 200 employees in the same operational unit with the same employer is reached. Otherwise, no information needs to be provided.
In the second step, the party obliged to provide information should check that the written form has been complied with and that the time requirements have been met. Otherwise, information may also be refused.
Subsequently, it should be examined whether there is a peer group of more than six persons. Otherwise, the party obliged to provide information does not have to determine the average remuneration and the specified remuneration components and only has to provide the remaining information on the determination of remuneration.
Only if all the prerequisites mentioned have been met, the remuneration and the remuneration components are to be determined in the order shown. The party obliged to provide information has three months to process the request for information after receipt.
VII. First experiences in practice
There have been few published concrete experiences so far. In April 2018, a survey conducted by the Federal Association of Labor Lawyers in Enterprises [Bundesverband der Arbeitsrechtler in Unternehmen – BVAU] was reported in various publications for the first quarter 2018, suggesting that there have been rather few requests for information by employees so far. In the surveyed companies with less than 500 employees, there had been no requests at all; more than half of all the companies surveyed did not receive any requests. The numbers of actual requests were not reported. However, a survey of employees showed that one third would possibly start a request and 1/3 did not want to start it under any circumstances. It is therefore possible that the previous reluctance to act will ease.
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