Germany: Liability under the General Equal Treatment Act: How an Effective Compliance Mechanism Protects Employers

A recent ruling by the Berlin-Brandenburg Higher Labor Court (Case No. 12 Sa 1014/24, judgment of May 16, 2025) highlights the critical importance of a functioning compliance mechanism. Employers who act swiftly, systematically, and transparently following an incident of discrimination can successfully prevent liability under Germany’s General Equal Treatment Act (AGG). The decision sends a clear signal to businesses.

Case Details

The plaintiff, an employee of color, had been employed by the defendant since early 2023. During a business trip, an early morning altercation occurred with his supervisor, who — while under the influence of alcohol — made racist remarks.

Upon receiving the complaint, the employer reacted immediately:

• The incident was investigated internally.
• All individuals involved were interviewed.
• A formal written warning (Abmahnung) was issued to the supervisor.
• Additionally, the company mandated compulsory anti-discrimination and sensitivity training. 
• The existing "zero-tolerance policy" against discriminatory behavior was re-emphasized and communicated throughout the company.

Despite these clear actions, the employee demanded compensation of €10,000 under Section 15(2) of the AGG. The Berlin Labor Court dismissed the claim, and the Berlin-Brandenburg Higher Labor Court fully upheld this decision.

The Decision of the Higher Labor Court

While the court acknowledged an infringement of dignity under Section 3(3) of the AGG, it denied the existence of a hostile work environment. The court explained that such an environment requires a certain level of severity, intensity, and duration; a single incident is only sufficient if it is exceptionally severe.

The court's decision hinged on the fact that the employer had responded promptly, comprehensibly, and proportionately. The measures taken demonstrated the existence of an effective compliance mechanism, comprising both preventive and reactive elements. By doing so, the employer had fulfilled its legal obligations (under Section 12 of the AGG) and proved that it neither tolerates nor structurally fosters discriminatory behavior in the workplace. Consequently, liability under Section 15(2) of the AGG was ruled out.

Conclusion: Practical Implications for Employers

This ruling underscores the central role of an effective compliance mechanism. Employers who prevent discrimination and react immediately to violations not only protect their employees but also shield their own company from liability risks under the AGG.

An effective compliance mechanism includes both:

Preventive Measures: Regular training, clear codes of conduct, functional reporting channels, and a culture of open communication.

Reactive Measures: Internal investigations, disciplinary actions under labor law (such as warnings, formal warnings, transfers, or, if necessary, dismissal), and targeted training for those involved.

Crucially, these steps must be documented and implemented transparently.

The judgment shows that employers who respond to allegations of discrimination in a swift, structured, and verifiable manner can successfully fend off compensation claims. A clearly defined and documented compliance mechanism is therefore not just a legal necessity but also a hallmark of responsible corporate governance. It builds trust, strengthens company culture – and offers the best shield against liability under the AGG.