Pay Transparency: Update for Employers in Germany

00:00

24:53

Quick Hits

• Under the German Pay Transparency Act, disclosure requests can only be asserted within a narrow time frame. With respect to pay information, the statute provides only an establishment-level right to disclosure, not a companywide one.
• The EU Pay Transparency Directive will substantially expand employers’ disclosure and reporting obligations. Going forward, job applicants will have a right to pay information as early as the interview stage.
• Germany must transpose the EU Pay Transparency Directive by June 7, 2026.

The German Federal Labor Court (Bundesarbeitsgericht (BAG)) is currently examining the scope of information disclosure rights under the existing German Pay Transparency Act (Entgelttransparenzgesetz (EntgTranspG)). The underlying case is a decision from the Regional Labor Court of Cologne (Landesarbeitsgericht Köln (LAG)), Judgment of February 12, 2025, Ref. No. 5 Sa 479/23). At the same time, a fundamental reform of the Pay Transparency Act is underway to transpose the EU Pay Transparency Directive (EU 2023/970), which will have significant implications for employers.

Current Legal Framework: The LAG on the Scope of Disclosure Rights

The LAG recently issued an opinion in a case in which a female employee requested information about the criteria used to determine pay and the median salary of her male colleagues. She sought information spanning multiple years and covering the entire company.

The court dismissed the claim, clarifying three key points:

1. Where the criteria for pay determination are set out in a works agreement, a reference by the employer to that agreement is sufficient. A separate, explicit disclosure is not required.
2. The disclosure right relates to the calendar year preceding the request—not multiple years in the past. A request submitted in 2025, for example, can only cover the year 2024.
3. The disclosure obligation is limited to the establishment where the requesting employee works. There is no right to disclosure of the companywide median salary.

The BAG will hear the appeal on February 19, 2026, and will reconsider the temporal and geographic scope of the disclosure right.

Outlook: The EU Pay Transparency Directive

With EU Directive 2023/970, which must be transposed by June 2026, German pay transparency law will be fundamentally expanded. The key changes are as follows:

Right to Pay Information

• Job applicants will be entitled to information about the starting salary or pay range before the job interview. In addition, asking about a job candidate’s current salary will no longer be permissible.
• For existing employment relationships, disclosure rights will be significantly broadened. Employees will be able to request information about their individual pay level as well as the average pay of their comparison group, broken down by gender. The limitation to the establishment level will no longer apply.
• In addition, employers will be required to inform their workforce annually about the existence of this right-to-pay information.
• The German federal government is currently considering a time limitation on the disclosure period. Whether such a restriction is compatible with EU law remains to be seen.

Transparency Obligations

Employers must inform all employees about the criteria used to determine their pay, pay levels, and pay progression. These criteria must be objective and gender-neutral, and must be made easily accessible, e.g., by publication on the company intranet.

Reporting Obligations

Companies with at least 150 employees, and, from 2031, those with at least one hundred employees, will be subject to regular reporting requirements on the gender pay gap. This goes well beyond the current legal framework, which only requires reports upon request from the works council.

Penalties and Remedies

• Violations may result in penalties and damages claims by employees.
• The evidentiary threshold for employees to establish pay discrimination will be further lowered. Instead of the current rule allowing employees to present circumstantial evidence as a first step, a full reversal of the burden of proof will apply. In practical terms, employers will now have to prove that no pay discrimination exists.
• Employers may also want to note that contractual clauses prohibiting employees from disclosing their salary will be unenforceable going forward.

Key Takeaways

While the LAG’s decision may appear employer-friendly, the expansions introduced by the directive should be taken seriously. It will be interesting to see how the BAG positions itself in regard to the LAG’s decision ahead of the directive’s transposition.

With the transposition of the EU Pay Transparency Directive due by June 7, 2026, the requirements for justifying pay differences will increase substantially. Recent BAG case law on pay discrimination already demonstrates that courts are applying a strict standard to the requirement for transparent pay systems. Employers may want to review their compensation structures early for transparency and gender neutrality and to make adjustments where there are indications of discrimination.

Ogletree Deakins’ Berlin and Munich offices and Pay Equity Practice Group will continue to monitor developments and will post updates on the Cross-Border, Germany, and Pay Equity blogs as additional information becomes available.

Karl Melzer is an associate in the Berlin office of Ogletree Deakins.

Teodora Ghinoiu, a law clerk in the Berlin office of Ogletree Deakins, contributed to this article.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts