Germany’s Act on Equal Treatment brings discrimination laws under one blanket, but it will potentially increase the burden for companies, warns Michael Leue

On 29 June 2006, the German Federal Parliament passed the much-debated Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz (AGG)). The AGG, which came into force on 18 August 2006 and was subsequently amended on 19 October 2006 to correct inconsistencies, implements the EU Race and Ethnic Origin Directive 2000 and the Framework Employment Equality Directive 2000.

After several unsuccessful attempts to pass legislation implementing the directives, the decision to finally enact a comprehensive anti-discrimination law was prompted in part by a recent judgment by the European Court of Justice against Germany for failing to implement these directives.

The AGG replaces the scattered anti-discrimination provisions previously contained in several other German laws and imposes new obligations and potential liabilities on any company doing business in Germany.

The purpose of the AGG is to ensure equal treatment for all in the workplace. The act prohibits any unlawful discrimination based on race, ethnic origin, sex or sexual identity, religion or belief, disability or age. Protected individuals are employees, apprentices, job applicants and people whose employment has ended.

Freelancers are protected if they work mainly for only one employer and are either economically or socially dependent on such an employer. Other freelancers, as well as executive directors, who, under German law, are self-employed, are protected only in regard to access to employment and promotions. Consultants and other independent contractors are not covered.

One area of intense debate was terminations. German law had always provided extensive protection for employees against unfair dismissal. Employers now fear that the AGG will increase the protection against termination and cause even more difficulties when letting people go.

Legal experts in Germany are currently discussing whether terminations should be solely governed by the specific provisions of the Employment Protection Act (Kündigungsschutzgesetz), or if they are covered by the new AGG. If so, would such an application comply with the provisions of the EU Directive?

What equals discrimination?

Employees are either discriminated against directly or indirectly. An indirect discrimination can be caused by rules that appear neutral at first glance, but which, in fact, discriminate against a certain group of employees. For example, a rule that denies granting special benefits to part-time workers or employees who are on maternity leave will affect female employees more than male employees, as, at least in Germany, a higher percentage of female employees have flexible hours.

The AGG is likely to have its greatest implications in the areas of recruitment, layoffs, relocations, promotions and remuneration of employees. It is expected that one of the most important changes will come from the prohibition of age discrimination. For example, a job advertisement seeking a “young employee” or a phrase such as “a young and dynamic team is seeking” could indicate discriminating behaviour from the employer.

Potential conflicts may also occur when rejected candidates ask the employer to explain the reasons why their applications were turned down. It may be advisable to have a second person present at such conversations and in the job interview – as is already common in the UK and the US – who can bear witness in a discrimination suit. In cases of written rejections, it has already become obvious that many employers are reluctant to reveal to candidates the reasons for their rejection.

Unequal treatment

Despite all this, the AGG does allow an employer to treat employees differently on grounds of their age, religion or the requirements of a job, if certain strict criteria are fulfilled. Unequal treatment on the basis of age may not be unlawful, for example, in case of preferential treatment of older employees in collective redundancies, the establishment of minimum or maximum ages for access to company pension schemes and the establishment of minimum ages for access to particular positions within the company. However, in practice, a defence based on these criteria may not be easy to invoke. It is always required that the employer shows objective reasons for an unequal treatment.

The labour court of Frankfurt, Arbeitsgericht Frankfurt, recently dismissed a discrimination suit of three pilots working for Lufthansa. The claim, which was one of the first since the AGG came into force, was filed against a regulation of the relevant agreement on tariffs that stipulates a retirement age of 60 for pilots. The court decided that such a retirement age is both necessary and adequate as the legitimate aim of this provision is to ensure the safety of passengers and crew.

Contrary to expectations, particularly from employers’ associations during the legislative passage of the AGG, the number of discrimination claims has so far been small. It will take more cases to achieve a greater certainty regarding the application of the AGG, particularly with the many exceptions of the law.

In case of unlawful discrimination, the primary compensation for employees is injunctive relief and damages. Employees or job applicants who have been discriminated against are entitled to uncapped damages for financial loss if the employer is at fault.

Job applicants who are rejected for reasons that are discriminatory, but who would nonetheless have been rejected, are entitled to a maximum of three months’ salary as damage.

Employees who are subject to discriminating behaviour have a right of retention, which enables them to refuse to work as long as the discrimination continues. While exercising this right, the employee remains entitled to their salary. In practice, however, it is doubtful that employees who feel discriminated against will risk using this right of retention, as a negative judgment will result in them not being paid for the time they refuse to work. The employer’s liability covers discriminations committed by either a legal representative of the company, such as a member of the board of directors or a co-employee, provided the discrimination was committed within the duties of such a person. Damages or injunctive relief have to be claimed within two months (preclusive time limit) in writing to the company.

Individuals who suffer unlawful discrimination are also entitled to damages for pain and suffering. In this context it should be noted that German courts historically have been reluctant to award substantial non-material damages. The German legal system also does not recognise punitive damages.

The AGG provides alleviation of the burden of proof for employees. If an employee can show evidence of a discriminating behaviour, the burden of proof shifts to the employer. However, the EU Directive only requires that an employee credibly presents discriminatory circumstances, which, under German law, could be shown by a sworn declaration. It is doubtful if this provision complies with the spirit of the EU Directive.

Before filing a discrimination suit against an employer, employees also can contact the Anti-Discrimination Commission (ADC), which was introduced as an arbitration board to advise employees in cases of assumed discriminations.

Safety measures

Employers can avoid liability by establishing several precautionary measures, such as training recruiters, making the wording of the AGG available to their employees and implementing codes of conduct and standardised procedures for dealing with discrimination complaints. They should also review existing policies and procedures to identify potential hazardous areas.

It is advisable to keep records of job applicants – to the extent permitted by data protection law – and to document the decision-making process relating to the hiring and firing of personnel, promotions, remunerations and rejections of applicants to ensure compliance with the AGG.

Michael Leue is managing partner at Bryan Cave