German Federal Labour Court (BAG) Announces Pivotal Change for Equal-Pay Claims

German member firm, Keller Menz, highlights a landmark decision of the German Federal Labour Court.

A change that fundamentally reshapes the evidentiary standard for equal-pay claims, significantly increasing compliance obligations and litigation risk for employers with employees in Germany, including international groups.

In a landmark judgment dated 23 October 2025 (BAG, 8 AZR 300/24), the German Federal Labour Court significantly lowered the evidentiary hurdles for equal-pay claims under German anti-discrimination law.

This development is pivotal for all employers with employees in Germany, including non-German multinationals, and should trigger a review of pay structures and compliance frameworks.

Key Takeaway: single comparator enough to trigger presumption of discrimination

Under the ruling, a pair comparison, i.e., showing that a female employee earns less than a male colleague in the same or equivalent role, is sufficient to establish a presumption of sex-based pay discrimination under Section 22 of the German General Equal Treatment Act (AGG).

Employees no longer must demonstrate a “preponderant probability” of systemic disparity or rely on median pay data from large peer groups for that presumption to arise.

Once an employee identifies a valid comparator of the other sex with higher pay for equal work, the burden immediately shifts to the employer to demonstrate objective, gender-neutral reasons for the pay difference. If the employer cannot do so, they risk being ordered not only to equalize future pay but also to pay compensation retroactively, potentially covering multiple years of difference plus interest.

Why this matters for HR, global mobility and compensation systems

This ruling aligns with the spirit of the EU Pay Transparency Directive (EU) 2023/970, which Germany must implement into domestic law by 7 June 2026, but pushes employers to act now, not later.

• Risk of costly litigation: Employers with insufficiently documented or inconsistently justified compensation systems face increased risk of litigation and large damages awards. Retroactive adjustments over several years can materially impact financial results. 
• International employers aren’t exempt: The court may apply German law to employees working in Germany regardless of the nationality of the employer. Thus, even foreign-based companies with German entities or personnel must ensure pay equity compliance.
• Pay structures must be audit-ready: Employers should conduct thorough pay equity audits, document objective justification for pay differences and implement robust compensation governance. Lack of transparency or inadequate documentation is now a clear legal liability.

Actionable Steps for Employers 

1. Conduct a comprehensive pay equity audit across roles, functions and demographics. 

2. Document legitimate business reasons (e.g., experience, performance, market benchmarks) for any pay differentials. 

3. Standardise compensation systems with clear, non-discriminatory criteria to withstand judicial scrutiny. 

4. Train HR and Compensation teams on pay transparency risks and litigation trends. 

Ignoring this decision isn’t an option 

German courts have signalled that equal pay claims will be more accessible and more rigorously enforced. 

For further information or to discuss any of the issues raised, please contact Stefanie Andrelang (stefanie.andrelang@keller-menz.de) on +49 (0) 89 2422300. 

Keep up to date on pay transparency here

If you want to be informed of any future updates around the EU's Pay Transparency Directive then please update your preferences here.