German Parliament Passes General Equal Treatment Act, Which Will Have a Considerable Impact on German Employment Practice

July 20, 2006

On July 7, 2006 the German General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz) (hereinafter the "Act"), which mainly relates to discrimination in the context of professional life, was adopted by the German parliament. The Act will become effective as of the beginning of August 2006. With the Act, the Federal Republic of Germany implements several European principles regarding equal treatment and anti-racism. Even though the terms of the Act are less sweeping than in its initial version, it is likely to considerably change German employment practice. Therefore, employers located in Germany must be prepared for these new rules. Otherwise, in case of non-compliance, employers may face large damages claims by employees who claim they were discriminated against, as well as adverse publicity. 

Although it has always been a basic principle of German law that discrimination is prohibited, the principles as to how to avoid discrimination in relation to a person’s professional life have never been codified in such detail. Almost all participants in daily professional life enjoy special protection under the Act (i.e., applicants, employees, apprentices, former employees and, to a certain extent, freelancers, independent contractors and members of corporate bodies, etc.). The Act explicitly outlines discrimination features, grants particular complaint rights to protected persons and obliges the employer to implement certain protection measures. Finally, compensation for damages as well as for pain and suffering can be imposed upon the employer whereby the employee’s burden of proof is considerably lowered.

The most relevant employment-related provisions of the Act are summarized as follows: 

  • The Act prohibits discrimination based on (i) race and ethnic origin, (ii) gender, (iii) religion or ideology, (iv) disability, (v) age and (vi) sexual identity. Employers must prevent any discrimination based on these characteristics for all terms and conditions of employment, including selection criteria.

  • The Act prohibits discrimination, whether direct (e.g., exclusion of female applicants) or indirect (e.g., exclusion of part-time employees from certain fringe benefits which discriminates against female employees as they are disproportionately represented in part-time positions). 

  • Exceptions to the equal treatment principle apply where the Act explicitly allows differential treatment. This is particularly the case if the employer has an objective reason (sachlicher Grund) for differential treatment of employees and the measures taken are essential and reasonable (e.g., age – under certain circumstances – may allow for unequal treatment, such as an automatic termination date in an employment contract when the employee attains retirement age). 

  • Finally, the Act prohibits harassment, including sexual harassment. Harassment is defined as any behavior related to one of the protected characteristics which offends or is meant to offend a person’s dignity. This includes a prohibition on a hostile work environment. 

  • The employer is generally liable for acts committed by its employees.

  • The Act requires employers to establish appropriate measures to protect employees against discrimination, such as providing suitable professional education and training programs for its employees. The employer must also take appropriate and reasonable disciplinary measures against employees who engage in prohibited behavior. 

  • If the employer fails to take appropriate measures to end (sexual) harassment, the harassed employee is permitted to take paid leave.

  • If discrimination occurs, the concerned person may (i) consult with his/her supervisor, collective bodies (if any), any other body that receives discrimination complaints, or the Federal Office against Discrimination (Antidiskriminierungsstelle des Bundes), which is to be established by the Federal Government for that purpose, and/or (ii) seek compensation for economic damages as well as for pain and suffering. The protected person has two months to file the respective claims.

  • The amount of the compensation received by a protected employee shall be duly proportionate to the suffered discrimination, but also must have "a substantively deterring effect" on the employer. There is no explicit limitation on the compensation amount and the general preventive component of the compensation claim is a rarely recognized principle under German law. One exception applies: If an applicant would not have been hired even if there had been no discrimination in the application process, any compensation for pain and suffering shall be capped at a maximum amount of three months salary.

  • When filing a claim, the employee or applicant must provide only evidence of the reasonable assumption of discrimination. For example, a job posting using only masculine pronouns may qualify for such an assumption if a female applicant is rejected. It is then up to the employer to prove that it did not act in a discriminatory manner, i.e., by proving that the male applicant was better qualified for the respective position. Employers should document the decision process in a precise manner in order to be prepared for potential discrimination claims and the burden of proof related thereto.

  • Furthermore, anti-discrimination associations (Antidiskriminierungsverbände) may be founded. Their purpose shall be to represent the interests of protected people or groups. We have been informed that the German parliament removed the right of anti-discrimination associations to represent protected persons in compensation claims. But the adopted Act has overlooked this change and, therefore, still includes such right to representation. It is likely that the Act will be amended in that respect. 

  • Finally, in cases of gross violation of the anti-discrimination rules, a works council (if any) or a union may file a separate claim against the employer in order to oblige the employer to enact the appropriate measures to end the misconduct (e.g., by modifying the hiring process or by implementing appropriate training courses for its employees). The right of these collective bodies to file a claim for compensation on behalf of the employee was removed during the legislative procedure. 

We advise those clients having subsidiaries in Germany to provide appropriate training to their employees in order to familiarize them with the Act and its consequences for daily professional life. Clear communication of the negative consequences resulting from any discriminatory misconduct (up to termination of employment) are recommended and could – in addition to a training session – be provided, e.g., in a code of conduct. Furthermore, all terms and conditions of employment should be reviewed to determine whether they comply with the Act’s anti-discrimination provisions. Finally, it is recommended that employers specifically train HR personnel and supervisors in order to ensure non-discriminatory procedures exist in the German subsidiary and to implement appropriate documentation schemes (particularly for hiring and promotion processes) in order to be prepared for potential discrimination claims from applicants or employees.   

Gibson, Dunn & Crutcher lawyers are available to assist clients in addressing any questions they may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or Christoph Kuhmann (+49 89 189 33-150; [email protected]) in the firm’s Munich office, or Gibson Dunn’s Labor and Employment Practice Group Co-Chairs Eugene Scalia in Washington, DC (202-955-8206; [email protected]) or Deborah Clarke in Los Angeles (213-229-7903; [email protected]). 

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.