A pay rise for everyone?!

Facts of the case

In early 2022, the employer offered new employment contracts to all employees with the aim of standardising working conditions. These included a one-off pay rise of 4%. One employee refused to sign the contract. In early 2023, the employer increased the pay of all employees by 5% who had signed the new employment contracts the previous year. The employee who had not signed the new contract received nothing. She subsequently brought a claim for a 5% pay rise.

The decision

The Federal Labour Court ruled in favour of the employee. The court clarified that the principle of equal treatment under labour law applied, as the employer was granting a benefit in accordance with a self-imposed, general and abstract rule. The benefit was granted regardless of the employee’s role, performance or function. The employer, however, granted it only to those employees who had signed the new contract the previous year. However, contrary to the employer’s view, the pay rise could no longer serve as a further incentive to sign the new model contract. This was because the employees who had already signed the contract in 2022 could no longer contribute to the standardisation of contracts. Therefore, this constituted preferential treatment of the employees who had already signed the new model contract.

Implications for practice

The Federal Labour Court (BAG) is continuing its line of reasoning. The court had already ruled similarly in 2007 (judgement of 26 September 2007 – 10 AZR 569/06). At that time, an employer had paid a special payment described as a Christmas bonus only to employees who had previously agreed to the amended contract terms ( ). In this case, too, there was therefore no incentive function. Both decisions show that the purpose and structure of a benefit must be consistent. If an objective has already been achieved, it no longer justifies any differentiation.

Practical tip

Employers may continue to use financial incentives to standardise working conditions. In this context, graduated pay rises that are directly linked to the conclusion of the amendment agreement may also be considered. However, employers should ensure that the incentive effect is genuine and proportionate to the intended purpose. Otherwise, there is a risk of breaching the principle of equal treatment under employment law.