Germany’s Federal Labor Court Rules on Gender Discrimination in Pay – Ogletree

Report on German Federal Labor Court Ruling and its Alignment with Sustainable Development Goals

Executive Summary

A landmark decision by the Federal Labor Court of Germany on October 23, 2025, has significant implications for advancing key United Nations Sustainable Development Goals (SDGs), particularly SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities). The court ruled that gender-based pay discrimination is presumed if a female employee is paid less than a male colleague performing equivalent work. This ruling shifts the burden of proof to the employer to justify any pay disparity, reinforcing the principle of equal pay for work of equal value and strengthening institutional frameworks for justice (SDG 16).

• The ruling establishes a presumption of discrimination based on a single male comparator, regardless of median pay levels.
• This legal clarification aligns with EU law and strengthens mechanisms for achieving economic justice and gender equality.
• The decision serves as a critical directive for corporate accountability ahead of the EU Pay Transparency Directive implementation deadline in 2026.

Case Background and Initial Judicial Review

The case originated with a female employee seeking retroactive equal pay, referencing remuneration data for several male colleagues made available through an internal company dashboard. The comparators identified were top earners whose compensation exceeded the median pay for male employees in the same hierarchical tier. The employer contested the claim, arguing the work was not of equal value and that the employee’s lower pay was justified by performance issues. The lower court, the Regional Labor Court of Baden-Württemberg, partially dismissed the claim. It ruled against awarding the difference up to the highest-earning comparator, instead granting only the difference up to the median pay level. The court reasoned that a single comparator was insufficient to establish a “preponderant probability” of gender-based discrimination, a decision that failed to fully support the objectives of SDG 5 and SDG 8.

Federal Labor Court Decision and SDG Implications

The Federal Labor Court overturned the lower court’s decision, remitting the matter for further review based on a clarified legal standard. The court’s ruling directly supports the enforcement of non-discriminatory policies for sustainable development, a key target under SDG 16 (Peace, Justice and Strong Institutions).

1. Rejection of “Preponderant Probability”: The court held that requiring a “preponderant probability” of discrimination is incompatible with EU law, lowering the evidentiary bar for employees and improving access to justice.
2. Presumption of Discrimination: It clarified that discrimination is to be presumed if an employee can demonstrate that a colleague of the opposite gender receives higher pay for the same or equivalent work.
3. Shift in Burden of Proof: Following this presumption, the onus is on the employer to rebut it with objective, gender-neutral justifications for the pay gap.
4. Irrelevance of Median Pay: The court deemed the size of the comparator group and median pay levels irrelevant to establishing the initial presumption of discrimination, focusing instead on individual equity.

Advancing SDG 5 (Gender Equality) and SDG 8 (Decent Work)

This judgment is a significant step toward achieving Target 8.5 of the SDGs, which calls for “equal pay for work of equal value.” By simplifying the process for women to challenge pay disparities, the court’s decision directly confronts systemic economic discrimination, a primary barrier to fulfilling SDG 5, which aims to end all forms of discrimination against women and girls.

Strengthening SDG 10 (Reduced Inequalities) and SDG 16 (Strong Institutions)

The ruling reinforces Target 10.3, which seeks to ensure equal opportunity and reduce inequalities of outcome by eliminating discriminatory practices. By providing a robust legal mechanism for pay equity claims, the German judicial system strengthens its role as a strong institution (SDG 16) capable of enforcing non-discriminatory laws and promoting a just and equitable society.

Outlook: Corporate Responsibility and the EU Pay Transparency Directive

The Federal Labor Court’s decision acts as a catalyst for corporate action, urging companies to proactively align their compensation structures with principles of fairness and transparency. This is particularly urgent given the impending deadline of June 7, 2026, for EU member states to implement the Pay Transparency Directive (EU) 2023/970. This directive mandates pay transparency and reporting, compelling organizations to contribute directly to the achievement of SDGs 5, 8, and 10. German companies must now prepare for heightened scrutiny and legal challenges, ensuring their pay practices are justifiable, equitable, and fully compliant with both national law and international sustainability commitments.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 5: Gender Equality

   • The article directly addresses gender equality by focusing on a legal case concerning gender-based pay discrimination. The core issue is a female employee being paid less than her male colleagues for equivalent work, which is a fundamental aspect of gender inequality in the economic sphere. The Federal Labor Court’s ruling that “gender-based discrimination is presumed if a woman earns less than a comparable male colleague” explicitly links the article’s content to the goal of achieving gender equality.

2. SDG 8: Decent Work and Economic Growth

   • This goal is relevant as it promotes “full and productive employment and decent work for all women and men… and equal pay for work of equal value.” The article’s central theme revolves around the legal principle of “equal pay for equal work or work of equal value,” which is a cornerstone of decent work. The court case and the supporting legislation, such as the German Pay Transparency Act, are mechanisms to ensure this principle is upheld, contributing to fair and decent working conditions.

3. SDG 10: Reduced Inequalities

   • The article connects to the goal of reducing inequalities within and among countries. Specifically, it deals with reducing income inequality based on gender. The court’s decision and the EU Pay Transparency Directive are legal actions aimed at eliminating discriminatory practices in remuneration. By ensuring that pay is not determined by gender, these measures directly contribute to reducing economic disparities and promoting equal opportunity for all.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 5: Gender Equality

   • Target 5.1: End all forms of discrimination against all women and girls everywhere. The entire article is about a legal challenge to gender-based discrimination in the workplace. The court’s ruling, which presumes discrimination when a woman is paid less than a male counterpart for equal work, is a direct legal mechanism to combat and end this specific form of discrimination.

2. SDG 8: Decent Work and Economic Growth

   • Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men… and equal pay for work of equal value. This target is explicitly mentioned in the article through the principle of “equal pay for equal work or work of equal value.” The legal case described is a practical application of this target, where a female employee sought “retroactive equal pay” based on the remuneration of her male colleagues performing equivalent work.

3. SDG 10: Reduced Inequalities

   • Target 10.3: Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard. The article highlights several pieces of legislation and legal actions that align with this target. The German Pay Transparency Act (Entgelttransparenzgesetz), the European Union’s pay transparency directive (Directive (EU) 2023/970), and the Federal Labor Court’s judgment are all examples of “appropriate legislation, policies and action” designed to eliminate discriminatory pay practices and ensure equal opportunity.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators for SDG 5 and SDG 8

   • The gender pay gap for equal work: The primary indicator is the difference in pay between men and women performing the same or equivalent work. The article details how this is measured in the legal case, referring to the “payment of the difference up to the pay of the highest-earning comparator” and the “difference up to the median.” The court’s focus on a direct comparison between a female employee and a “male colleague who performs the same work or work of equal value” provides a specific method for measuring this gap on an individual or company level.

2. Indicators for SDG 10

   • Existence and implementation of legal frameworks: The article points to the existence and enforcement of laws as a key indicator of progress. The mention of the “German Pay Transparency Act” and the upcoming implementation of the “European Union’s pay transparency directive” by June 7, 2026, serve as concrete indicators. The court’s ruling itself is an indicator of the active enforcement of these legal frameworks to combat discrimination and reduce inequality. The requirement for a “transparent pay structure” is another measurable aspect of these policies.

4. Table of SDGs, Targets, and Indicators

Source: ogletree.com