Federal Labour Court on Pay Transparency and Equal Pay: Why the new ruling puts companies under pressure

With its recent ruling of 23 October 2025 (8 AZR 300/24), the Federal Labour Court has sent a clear signal on equal pay for men and women – and has thus put considerable pressure on employers.

The signal:

Even the mere allegation that a single colleague of the opposite sex receives higher pay for the same or equivalent work gives rise to a presumption of gender-based discrimination. If the employer cannot refute this presumption, they must pay the comparative colleague's salary – even if that colleague is the top earner in the comparison group.

The case:

An employee had filed a lawsuit because she demanded retroactive equal pay with certain male comparators with regard to several remuneration components. The lower court had initially only awarded her an adjustment to the median remuneration of the male comparison group. The Federal Labour Court expressly does not want to leave it at that.

Ruling in a nutshell:

According to the press release, the Court clarifies:

• If an employee demonstrates and in the event of a dispute, proves that her employer pays a colleague of the opposite sex higher remuneration for work of equal value, gender-based pay discrimination is legally presumed.
• The size of the comparison group or the median pay of the gender groups is irrelevant.
• If the employer cannot refute the presumption, they are obliged to pay the remuneration that the comparative employee received. It may therefore be necessary to adjust the remuneration to the "very top" and not just to the median remuneration.
• Due to the referral back to the lower court, the employer has another chance to refute the presumption of unequal treatment and to explain the reasons for the unequal remuneration of the plaintiff employee compared to the comparable "top earner".

Important note: The ruling is currently only available as a press release. The written reasons for the decision are still pending and may contain further aspects that could be restrictive or clarifying.

What companies need to consider now:

The ruling, which is currently only available as a press release, significantly tightens the requirements for companies:

• Reversal of the burden of proof: Employers must be able to explain plausibly and in a documented manner the objective reasons for differences in remuneration. If the relevant documents or comprehensible criteria are missing, there is a risk of a ruling against the employer – even if the differences were objectively justified. Documentation takes precedence over objective justification in this case.
• Expansion of comparison levels: Employers should not only keep an eye on median values in the future, but also take into account direct comparisons between individual employees.
• Risk of chain reactions: If an employee receives a higher salary due to the adjustment to the top earner, other colleagues of the same gender may demand a corresponding adjustment in the next step. This can trigger a chain reaction of further pay adjustments – with corresponding potential for disputes.
• Documentation and transparency requirements: Companies should review their remuneration systems now – particularly with regard to equal treatment, evaluation criteria, transparency and documentation.

Significance for employers:

The requirements for a verifiable remuneration structure are increasing. Companies must act now. Those who do not document everything completely run the risk of losing legal disputes – regardless of whether discrimination actually took place.

Our recommendation for companies:

• Review remuneration systems and processes for transparency and fairness.
• Document all criteria for remuneration decisions.
• Prepare for proceedings.
• Avoid blind spots in the remuneration structure.

Outlook – requirements will continue to increase:

The decision is related to the European Pay Transparency Directive, which must be transposed into national law by 7 June 2026. The current legal situation already shows that employers are obliged to disclose remuneration structures and actively review gender-related pay differences. With its ruling, the Federal Labour Court has made it clear that transparency and traceability of remuneration systems are already required today.

Conclusion:

The ruling marks a tightening of case law on equal pay. Those who wait for the EU Pay Transparency Directive to be implemented risk failing to meet the requirements that are already in force and those that will be even stricter in the future – action is needed now.

Do you want to act proactively? We are ready to answer your questions – please contact us.