German Federal Labour Court on discrimination in overtime bonuses

A part-time carer had sued her employer for non-discriminatory overtime pay. The German Federal Labour Court has now ruled in favour of the employee: overtime bonuses must also be granted to part-time employees as soon as they exceed their agreed working hours in order to prevent discrimination. What this means in practice and why it may result in the employer's liability for compensation for gender-based discrimination can be found below.

(Federal Labour Court, 5 December  2024 - 8 AZR 370/20)

Dispute about overtime bonuses and discrimination

The defendant – a dialysis provider operating nationally with over 5,000 employees – employed the employee on a part-time basis. Her working hours were equivalent to 40% of the regular working hours of a full-time employee. The collective agreement under which the employee worked ruled that an overtime bonus or a time credit would only be granted if the scope of work exceeded the regular working hours of full-time employees. At the end of March 2018, the employee's working time account showed a credit of over 129 hours. These hours worked exceeded the employee's contractually agreed working hours. Despite this, she did not receive any overtime bonus, as the number of hours was below the regular working hours of full-time employees. The employee requested a time credit for the overtime worked.

The employee argued that she was being discriminated against on the grounds of her gender due to her part-time employment and the fact that the majority of part-time employees at the employer are women. Due to this unequal treatment, the employee demanded compensation in accordance with the General Equal Treatment Act (AGG) in addition to the time credit. The employer rejected these accusations and argued that the collective agreement did not contain any unlawful discrimination against part-time employees or any discrimination on the basis of gender.

Federal Labour Court refers key questions to the European Court of Justice

The labour court, which was the first court to hear the case, ruled in favour of the employer and dismissed the claim. On appeal, the Higher Labour Court of the State of Hessen granted the employee the time credit she had demanded but rejected the claim for compensation under the General Equal Treatment Act (Higher Labour Court of Hessen, Judgment dated 19 December 2019 – 5 Sa 436/19). The court justified the last decision on the fact that the disadvantage had such a minor impact that compensation would be inappropriate.

In the final court of appeal, the Eighth Senate of the Federal Labour Court referred to the European Court of Justice (EuGH) for interpretation of EU law in this matter (Federal Labour Court, Court order dated 28 November 2021 – 8 AZR 370/20 (A) – BAGE 176, 117).

Part-time workers' right to overtime bonuses

In its judgments of 29 July 2024 (C-184/22 and C-185/22), the European Court of Justice ruled that the collective agreement provision is contrary to EU law and unfairly discriminates against part-time employees. The Federal Labour Court followed this in its decision and granted the employee the full amount of the time credit she had been claiming. It stated that an individual calculation should be made based on the proportion of working hours. A collective agreement provision that grants overtime bonuses only once the regular working hours of a full-time employee have been exceeded is unlawful and disadvantages part-time employees compared to full-time employees. According to the Federal Labour Court, such a provision violates the prohibition of discrimination against part-time employees (section 4 para. 1 of the German Part-Time and Fixed-Term Employment Act (TzBfG)), unless the unequal treatment is justified by objective reasons. The Federal Labour Court does not see any such reasons in the present case.

Indirect gender discrimination

At the same time, the Federal Labour Court found unlawful indirect discrimination on grounds of gender because there were significantly more women (84.74%) than men in the group of part-time employees. Therefore, the Federal Labour Court also decided in favour of the employee and awarded her compensation in accordance with section 15 para. 2 AGG in the amount of EUR 250.00. However, this is only a small fraction of the claimed compensation totalling EUR 4,485.06. The Federal Labour Court considered the non-pecuniary damage resulting from the indirect gender discrimination to be compensated and the amount to be an appropriate amount to deter employers from similar practices in the future.

Outlook

Following the clarification of the legal issue by the European Court of Justice and the judgment of the Federal Labour Court, it is now settled law that overtime bonuses for part-time employees may not be linked to the working hours of full-time employees. When calculating overtime bonuses for their part-time employees, employers must set the same standards as for full-time employees, i.e. they must receive an overtime bonus in proportion to their individual working hours from the first hour of overtime, provided this is also the case for comparable full-time employees. It is necessary to check on a case-by-case basis which objective reasons exist in the individual case which could justify a different treatment of part-time and full-time employees (section 4 para.1 TzBfG), which was not generally clarified by the judgment. In any case, employers are well advised to carefully check their overtime policies at the level of employment contracts or company agreements for compliance with the principles of equal treatment. If, as in the present case, the majority of part-time employees are women, there is also a risk of compensation claims, which could be higher than the amount awarded in this case.