Equal Pay Update: (No) “Adjustment to the Very Top”

The transposition of the EU Pay Transparency Directive (Directive 2023/970/EU, EUPTD) into domestic law remains outstanding - even after the transposition deadline of 7 June 2026, set by the EU legislator. According to CJEU case law (Case 152/84, *Marshall*), the direct horizontal application of EUPTD requirements (such as the right to pay information) to domestic employment relationships from 7 June 2026, onwards is relevant only for organisations or bodies that are subject to state authority or supervision and are endowed with special powers exceeding those resulting from the rules applicable to relationships between private individuals. We have discussed the key employment law implications of the failure to transpose the directive on time in our EUPTD Client Alert 05/2026. Legislative processes to transpose EUPTD requirements into domestic law are also still underway in most other EEA states (for a current overview of the status quo in individual member states, please see our regularly updated FAQs, as well as the Deloitte EUPTD Transformation Tracker). At the same time, case law is continuously developing the legal principles governing the prerequisites for and the amount of the claim to gender-based pay equality under the currently applicable German Pay Transparency Act (Entgelttransparenzgesetz, EntgeltTranspG 1.0). Current discussions focus in particular on the substantive scope and extent of the burden-of-proof rules set out in Section 22 of the General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG).

1. The Core Parameters of a Gender-Based Equal Pay Claim and the Classification of the Reversal of the Burden of Proof under Section 22 AGG in the Recent Dispute between the Baden-Württemberg Higher Labour Court and the Federal Labour Court

The core parameters of a gender-based equal pay claim, for which the courts recognise Article 157 of the Treaty on the Functioning of the European Union (TFEU) and Sections 3(1) and 7 EntgeltTranspG as the legal basis, are:

(1) The performance by the claimant employee of the same work, or work of equal value, as that performed by the relevant comparator employee(s) of the opposite gender;

(2) A gender-based pay differential in relation to such same work or work of equal value; and

(3) Any justification for that gender-based pay differential.

Under the traditional legal understanding in remuneration practice, Section 22 AGG establishes, in relation to parameters (2) and (3), a reversal of the burden of proof regarding the causal link between the gender-based pay differential and its unlawful gender-related nature. Where the claimant employee presents and proves facts giving rise to a presumption of gender-based discrimination, the burden shifts to the employer to demonstrate that the pay differential is not based on objectively unjustified gender-related reasons.

By contrast, under the traditional approach in remuneration practice, including the case law of the CJEU (for example, its judgment of 26 June 2001 in Case C-381/99, Brunnhofer), the claimant employee bears the burden of pleading and proving that the work performed is the same as, or of equal value to, that of the comparator employee(s).

Furthermore, the traditional understanding in remuneration practice has been that, while the benchmark for assessing the pay differential under parameter (2) is initially established on the basis of an individual comparator comparison put forward by the claimant employee with a higher-paid employee of the opposite gender performing the same work or work of equal value, both the specific pay differential, as the element giving rise to the presumption of causation, and the level of the corresponding remuneration claim must ultimately be determined through an overall assessment of all circumstances of the individual case, taking into account the submissions made by the employer in discharging its burden of proof under Section 22 AGG.

These principles were most recently reaffirmed, inter alia, by the Baden-Württemberg Higher Labour Court (LAG Baden-Württemberg) in its judgment of 1 October 2024 (2 Sa 14/24). In particular, the court rejected both an automatic presumption of causation based solely on an individual comparator comparison and an automatic "levelling-up" of remuneration to that of a single exceptionally highly paid comparator employee of the opposite gender (see also our Equal Pay Client Alert 12/2024).

In the appeal on points of law admitted by the Baden-Württemberg Higher Labour Court, the German Federal Labour Court (Bundesarbeitsgericht, BAG) set aside that judgment in its decision of 23 October 2025 (8 AZR 300/24), modified certain aspects of the above principles, and remitted the case to the Baden-Württemberg Higher Labour Court for a final determination.

In its subsequent decision in the same proceedings of 18 August 2026, the Baden-Württemberg Higher Labour Court critically engages with the BAG's reasoning concerning these principles. In substance, it continues to endorse the traditional legal approach and, in particular, further clarifies the significance of the individual comparator comparison and the means by which an employer may rebut a presumption of gender-based pay discrimination. In addition, the judgment contains practical guidance on establishing that work is the same or of equal value; objective factors capable of justifying differences in remuneration; and the handling of individual remuneration data obtained from gross salary lists provided by the employer to the works council in connection with its participation rights under Section 80 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG).

Ultimately, the Baden-Württemberg Higher Labour Court adheres to its central premise:

The higher remuneration of a single comparator employee of the opposite gender does not automatically result in a "levelling-up" of pay. Even where an individual comparator comparison gives rise to a presumption of gender-based disadvantage, the employer may rebut that presumption by reference to the overall remuneration structure of the male and female comparator groups, together with other objective factors.

2. The Facts of the Case

The claimant employee had been employed for many years by the defendant, or its legal predecessor, and had been assigned to the third management level (E3) since June 2008. Following several periods of parental leave, she worked on a part-time basis, corresponding to 50% of full-time working hours, both between those periods of parental leave and thereafter until the end of 2022. Since 2023, she has again been employed on a full-time basis. She has also been a member of the defendant’s works council since 2022.

In addition to her base salary, the claimant’s remuneration comprised a Company Bonus, share-based remuneration under a Performance Phantom Share Plan (PPSP), and a pension capital component (PCO) as part of the company pension scheme.

Taking her part-time status into account, the claimant’s remuneration in respect of base salary, Company Bonus and PCO was below both the median remuneration of the male E3 comparator group and the median remuneration of the female E3 comparator group. The PPSP allocations granted to her were below the cross-gender average allocation.

A male E3 colleague of the claimant (S.), who had likewise been assigned to this management level since 2008 and had worked continuously on a full-time basis throughout that period, received significantly higher remuneration than the claimant and also than the other members of the male comparator group.

Relying on this colleague as her comparator, the claimant sought, in particular, payment of the difference between her remuneration and that of S., and, in the alternative, an adjustment to the median remuneration of the male comparator group. In relation to the PPSP allocations, she ultimately sought, as her primary claim, an adjustment to the highest allocation granted to any E3 employee.

The individual remuneration data relating to colleague S. had been disclosed to her by a member of the works council on the basis of the gross salary lists accessible to the works council. Following her election to the works council, she was also able to inspect those data herself in the exercise of the works council’s relevant participation rights under Section 80(2) BetrVG.

A further issue in dispute in the proceedings was, initially, an additional claim by the claimant for employment in accordance with her contractual duties. In this context, the claimant initially argued that the work actually performed by her was of a lower value and was not comparable to that performed by the other E3 employees, whereas the defendant initially maintained that the respective roles were comparable.

In the subsequent course of the proceedings, the claimant came to accept that her duties were comparable to those of the other E3 employees. The defendant, by contrast, then challenged comparability specifically with regard to S., arguing that he held a position superior to that of the claimant and was responsible for numerous duties of a higher value and level of responsibility.

3. Key Legal Principles Established by the BAG in its Decision of 23 October 2025

In its decision, the BAG established the following key legal principles:

1. An individual comparator comparison may also be based on the highest-paid member of the comparator group of the opposite gender, and that individual's remuneration may serve both as conclusive evidence of gender-based disadvantage and as the benchmark for determining the relevant pay differential.
2. The reversal of the burden of proof under Section 22 AGG also extends to the employee’s submissions concerning comparator employees of the opposite gender performing the same work or work of equal value.

On the merits, however, the BAG was unable to determine conclusively whether the defendant had successfully rebutted the presumption of pay discrimination assumed by the court. It therefore remitted the case to the Baden-Württemberg Higher Labour Court for further clarification of the relevant facts and a final determination of the dispute.

4. The Baden-Württemberg Higher Labour Court Judgment of 18 August 2026: Further Development of the Established Principles Governing the Scope and Reach of the Reversal of the Burden of Proof under Section 22 AGG

In its judgment of 18 August 2026, the Baden-Württemberg Higher Labour Court held that, in respect of the individual remuneration claims for the calendar years 2018 to 2022, the claimant was entitled to an adjustment of her remuneration to the median remuneration of the male comparator group. With regard to the PPSP benefits, the court recognised an entitlement to the cross-gender average allocation, but not to the highest allocation awarded. The court rejected any further adjustment of the claimant's remuneration to the remuneration level of colleague S.

In support of its decision, the Baden-Württemberg Higher Labour Court further developed the established principles governing the application of the reversal of the burden of proof under Section 22 AGG as follows:

(1) Higher Remuneration of an Individual Comparator of the Opposite Gender as an Indicator of Gender-Based Disadvantage within the Meaning of Section 22 AGG, Coupled with a Comprehensive Overall Assessment

The court held that the overall assessment must already be undertaken when determining whether a gender-based disadvantage exists at all in relation to the comparator employee of the opposite gender relied upon by the claimant.For the purpose of rebutting an alleged gender-based disadvantage, the employer may also rely on the remuneration structure of the entire male and female comparator groups. In particular, it may be taken into account that the comparator employee selected by the claimant is himself a top earner within the comparator group of the same gender and receives remuneration substantially above both the median and the average.

Accordingly, the overall assessment of the comparator group serves as a corrective mechanism enabling the court to identify situations in which an individual comparator comparison may provide a misleading indication of discrimination.

At the same time, the court emphasised that reliance on the overall remuneration structure alone is insufficient to rebut the presumption. Rather, the employer must, in any event, establish at least one additional objective fact which, when considered as part of the overall assessment, is capable of supporting a finding that the presumption has been fully rebutted and that the pay differential vis-à-vis the comparator employee of the opposite gender relied upon in the individual comparator comparison is not attributable to gender-related reasons.

(2) Pay-Relevant Length of Service and Full-Time Employment as Factors to Be Considered in the Overall Assessment

According to the Baden-Württemberg Higher Labour Court, pay-relevant seniority may constitute such an additional objective factor. The court reasoned that a longer period of actual service in a comparable role may, on a generalised assessment, justify higher remuneration because it is typically associated with greater professional experience.

However, reliance on greater seniority than that of the claimant as an objectively legitimate differentiating factor will not be appropriate in a particular case where the additional period of professional experience no longer results in any further improvement in the quality of the work performed.

The court further held that periods of parental leave generally do not have to be taken into account when calculating such seniority and that periods of part-time employment may be considered only on a pro rata basis.

(3) The Reversal of the Burden of Proof under Section 22 AGG Relates Only to the Causal Link Between the Disadvantage and the Employee’s Gender, Not to the Prior Determination of the Same Work or Work of Equal Value

The Baden-Württemberg Higher Labour Court reiterated the principle, likewise established in the case law of the CJEU, that the claimant employee bears the burden of proving that his or her work is the same as, or of equal value to, that of the comparator employee(s) of the opposite gender relied upon.

In the case at hand, the court emphasised that such proof cannot, as a matter of principle, be established where the claimant's submissions concerning the comparator group at issue are contradictory.

5. Additional Practical Principles Derived from the Baden-Württemberg Higher Labour Court’s Judgment of 18 August 2026

The following additional principles established by the Baden-Württemberg Higher Labour Court are of particular relevance for remuneration practice:

(1) Application of the Pro Rata Temporis Principle Also in the Equal Pay Assessment of Individual Remuneration Components

Where remuneration components granted by the employer are linked to the extent of the employee’s work performance, the resulting quantitative differences in remuneration between part-time and full-time employees are permissible from an Equal Pay perspective.

In this regard, the Baden-Württemberg Higher Labour Court referred to the principle consistently applied by the BAG in its settled case law that the pro rata temporis principle inherently excludes discrimination on the ground of part-time employment. Accordingly, where a remuneration component is proportionately linked to working time, a lower payment to a part-time employee does not, in itself, constitute unequal treatment.

(2) Exclusion of Factual Submissions Based on the Unlawful Processing and Use of Remuneration Data Obtained for Purposes Unrelated to Equal Pay Claims

The Baden-Württemberg Higher Labour Court further raised the possibility that remuneration data introduced into litigation by a claimant employee may be subject to an exclusion from consideration where such data were obtained and processed in breach of data protection law.

In the present case, this issue concerned the remuneration data of colleague S., which had become available to the defendant’s works council through its statutory right to inspect employee salary lists in the exercise of its participation rights under Section 80(2) BetrVG.

The court correctly observed that the works council’s right to inspect gross salary lists pursuant to Section 80(2), sentence 2 BetrVG is not intended to facilitate the preparation of individual Equal Pay claims. Consequently, a works council may, as a general rule, not disclose the individual remuneration data of a top-earning employee to other employees against that employee’s wishes.

In this context, the Baden-Württemberg Higher Labour Court emphasised the distinction between an exclusion of factual submissions (Sachvortragsverwertungsverbot) and an exclusion of evidence (Beweisverwertungsverbot). The court referred to the judgment of the CJEU of 18 June 2026 (Case C-484/24), according to which the General Data Protection Regulation (GDPR) does not, as such, require the automatic exclusion of evidence in judicial proceedings; rather, whether information obtained in breach of data protection law may be relied upon in litigation is a matter to be determined under national procedural law.

6. Assessment of the Baden-Württemberg Higher Labour Court’s Principles and Their Application in Practice, Including in the Context of the EU Pay Transparency Directive (EUPTD)

The judgment of the Baden-Württemberg Higher Labour Court is of particular practical significance for employers, especially with regard to the documentation and defence of individual remuneration decisions:

• An individual comparator comparison does not necessarily lead to an adjustment to the comparator employee’s remuneration level. Where a single, exceptionally highly remunerated employee is relied upon as a comparator, employers may rebut a presumption of pay discrimination by referring to the remuneration structure of the entire male and female comparator group, including the position of the claimant employee’s remuneration within the comparator group of his or her own gender.
• Transparent documentation of objective remuneration criteria. The Baden-Württemberg Higher Labour Court once again recognised, in particular, pay-relevant length of service and the corresponding professional experience as legitimate factors capable of justifying differences in remuneration. The same approach is reflected in the EUPTD, under which employers may, pursuant to Recital 35 of the Directive, take into account factors such as individual performance, skills development and seniority when determining remuneration.
• Independent assessment of the comparability of roles. Classification within the same management level or pay grade does not, in itself, establish comparability. In particular where job families or management levels are defined broadly, employers should document not only the differing duties, responsibilities and requirements associated with individual roles, but also the criteria underlying the specific remuneration decision in question. This aspect is of fundamental importance for employers currently designing or refining their job evaluation systems as part of the preparation for, and implementation of, the EUPTD through the EntgeltTranspG.
• Purpose-specific and purpose-limited use of individual remuneration data. When granting access to gross salary lists, employers should remind works councils and staff councils of the specific purpose underlying the relevant collective participation right. The disclosure of individual remuneration data, or the use of such data by an individual works council member for personal purposes, is not only impermissible under data protection law but may also constitute a criminal offence pursuant to Section 120 BetrVG. In individual cases, such conduct may furthermore provide grounds for the exclusion of a works council member from office under Section 23(1) BetrVG.

We will continue to monitor developments in the legislative process surrounding the EntgeltTranspG 2.0, its implementation in practice, and broader legal developments in the field of Equal Pay, particularly in case law, and will report on these developments in future Client Alerts.