Equality control

The German Equal Treatment Act, champion of equal rights for all, looks set to send ripples through the EU, says Michael Magotsch.

On 18 August 2006, the German Equal Treatment Act came into force. The aim of the act is to make discrimination based on race, ethnic origin, gender, religion and belief, disability, age or sexual orientation illegal. In addition to this, it prohibits harassment and sexual harassment of employees.

The act will have a substantial impact on German employment law, even though it is expected that the courts will be reluctant to award compensation. So far, discrimination issues have played a very minor role in Germany.

Employees may now claim indemnification and damages, so employers need to be aware of the act to avoid discrimination cases and the bad publicity that may result. They also have to take preventative measures, such as training employees in anti-discrimination.

Scope of the act
The act affects all areas of employment relations, including job applications, interviews, the selection process, terms and conditions of employment, promotions, payroll schemes, and pensions. Surprisingly, it does not cover dismissals, even though this is in clear violation of EU directives. Nevertheless, privately owned companies should follow German rules for termination in the first instance and comply with EU law as far as possible in the second.

Under the act, discrimination can be both direct or indirect and encompasses instructions to discriminate as well as overt harassment and sexual harassment. In the case of unjustified discrimination, employees may be entitled to indemnification and damages from an employer. Therefore, employers should take steps to avoid discriminatory claims as far as they can.

Employers are obliged to nominate a compliance officer, to whom employees may address discriminatory issues. It is in the best interests of the employer to learn of such issues at an early stage. Therefore, it is advisable to appoint a person whom the employees trust, such as the head of HR, as well as a second person of the opposite gender to act as a co-compliance officer.

Although the decision of who the compliance officer(s) shall be remains with the employer, a working group should nevertheless be involved in establishing a compliance system to increase acceptance by the employees. Employers are obliged to announce the wording of the act, as well as who the compliance officer is internally through the company noticeboard or its intranet.

Training defence
The act provides for a ‘training defence’ when the employer can prove that the wrongdoer has received anti-discrimination training. In such a situation, the employer is not held liable. Thus, all employees should be trained to avoid the occurrence of discrimination issues.

Special care has to be taken in the training of executive employees and superiors, since the risk is substantially higher that they will discriminate against employees when giving instructions. However, it is suggested that all employees are trained in order to avoid the occurrence of discrimination issues. This is important as it is likely that the courts will hold employers liable for discrimination by lower-ranked employees that can be ascribed to a lack of training.

The act does not differentiate the liability for discrimination according to the size of the company, so small companies should also train their employees. So far, there is no case law on what training must comprise. However, simple information, such as a leaflet, is unlikely to be sufficient, in particular where executive employees are concerned. Those employees should therefore be trained more intensively.

Due diligence
All employment conditions – employment agreements, work agreements and collective agreements – should be carefully reviewed for possible discrimination issues, in addition to the usual HR due-diligence practices. Indirect discrimination issues, in particular, should be identified.
A lower, part-time salary will often discriminate against female employees, for example, and under the act, this would be indirect discrimination because of gender. If this cannot be justified, the part-time employee is entitled to the higher salary of other employees – besides any claims for damages.

Similarly, in the case of a payroll scheme that is based on age, the younger employee would be entitled to the higher remuneration of the older employee.

Job advertisements
It is important to understand that pre-trial discovery is unknown in German law – although, if the employee can produce prima-facie evidence, the burden of proof shifts to the employer. Such prima-facie evidence could be, for instance, gender-discriminatory wording in a job advertisement. Then, the employer would have to prove that the refusal of an applicant was nevertheless not discriminatory.

Employers should be very cautious with the drafting of job advertisements. If an advert is found to be discriminatory, applicants may claim for damages even though another applicant was better qualified. Usually, the compensation claim is limited to three months’ salary.

A job advertisement has to be gender neutral, and age restrictions, such as ‘under 30’, should be treated with caution. Mention of language skills – for example, ‘native speaker’ – may be deemed discriminatory because of ethnic origin. Phrases such as ‘stress-resistant’ or ‘young, dynamic team’ might be considered indirect discrimination because of age or disability.

So far, it has been standard practice in Germany to ask for a CV with a photo and date of birth. This practice is now likely to change.

Selection process
The selection process should rely on objective criteria, such as achievements or qualifications, instead of those that could be considered discriminatory. Moreover, they should be recorded as evidence in case of court proceedings.
All application documents should be returned to the applicant within two months of the letter of refusal being served to the applicant. This is in light of the obligation for applicants to file compensation claims within this time frame.

However, it is up to the employer to prove that the refusal letter was received and on what date. If the employer fails to provide sufficient evidence, the two-month deadline will not be triggered and applicants could file a complaint many months later. Therefore, serving the letter by registered mail has to be considered, so that the employer is able to prove the receipt of the letter. It would be worthwhile conducting an economic analysis of the risk of being sued on discrimination grounds versus the expense of registered mail.

Even the wording of a refusal letter should be carefully reviewed. The reasons for refusal should not be mentioned at all. Especially in Germany, the commonly used sentence “please be assured that your refusal is not based on your professional qualification” should be avoided. Instead, the reasons for refusal should focus on the insufficient professional qualifications and no other criteria.
In Germany, it is also common that refused applicants call the company to ask for the reason of refusal. It should be ensured that such calls are answered only by specially trained employees.

The new anti-discrimination laws have an impact on all employment relationships in Germany. Employers should take the necessary steps to avoid discriminatory claims and related bad publicity.

Michael Magotsch is Frankfurt managing partner at DLA Piper. He was assisted by senior associates Pascal R Kremp and Marcus Kamp.