The General Act on Equal Treatment in Germany came into force on 18 August, 2006, after heavy political discussions. With the Act, the Federal Republic of Germany implemented several European directives regarding equal treatment and anti-racism at work. The purpose of the Act is to prevent or eliminate discrimination on the basis of race or on the grounds of ethnic origin, sex, religion or beliefs, disability, age or sexual identity. So far there is no consensus about the practical importance of the Act. According to one opinion it is very limited, comparable with previous provisions regarding sexual discrimination. The contrary view is that the Act will increase damages claims to a US level and will lead to more bureaucracy in human resources (HR) processes.

Rules for employers

In any case the risks can be considerable, not only in financial terms but also with respect to reputation. Therefore it is worthwhile to have a look at the requirements of the Act for employers. The most important rules are:

- job advertisements may not be written in a discriminatory manner;

- the employer is obligated to take all actions necessary to protect employees from discrimination. This includes preventative measures.;

- the employer shall advise its employees of the unlawfulness of such discrimination and take appropriate action to prevent discrimination, in particular by offering training or continuing education courses;

- if any employees act in a discriminatory manner, the employer shall in each case take appropriate, necessary and reasonable action to prevent any further discrimination; and

- information about the person responsible for handling discrimination complaints shall be made accessible to all employees.

Prevent and defend

Unlawful discrimination puts employers at risk of claims for damages, compensation and invalidity of any discriminating actions. The best strategy for employers is not to rely solely on defending discrimination lawsuits but to set up its business processes and structures sufficiently early that most discrimination actions will be baseless from the outset. The employer should take a two-pronged approach with a 'prevent and defend' strategy.

According to this strategy many employers in Germany have evaluated their HR processes, particularly regarding hiring and promoting in the framework of HR audits. Vocational trainings for managers have become common. E-learning tools with respect to discrimination are very popular. Equal opportunities policies have been in place in some major corporations for quite a long time. No new policies have been heard about since the Act came into force.

However, there is still quite a considerable number of companies which are of the opinion that discrimination does not happen in their organisations. Such an approach shows a lack of sensitivity for the danger arising from discrimination and may be heavily disadvantageous, not only from a legal point of view but also with respect to reputation damages. It is becoming more and more common sense in Germany that a progressive diversity culture will have a positive impact in the recruiting market.

Compliance with EU directives

The Act does not apply in dismissal cases. This was a last minute political compromise and it is undisputed among legal authors that this restriction does not comply with the European Union (EU) directives, which define that a discrimination is unlawful if pertaining to dismissals. Hence the most important question for employment lawyers in Germany is how the Act will influence the highly artificial German system of protection against unfair dismissal. The first precedence cases have produced a high degree of uncertainty how dismissals can be effected in a legally valid manner in the light of the Act.

This uncertainty is a result of the fundamental failure of the German legislator. Instead of producing a separate act with unclear interferences to other employees' protecting provisions, it would have been much more appropriate to review the existing legislation and amend them in compliance with the requirements of the EU directives.

Deterrent effect of awards

The German court practice is very restrictive in awarding higher amounts of compensation. According to the EU directives the awards need to have a deterrent effect. Although the deterrent effect has not become part of the Act, it is widely expected that the level of compensation will explode, albeit only in some years after the European Court of Justice has had the chance to assess the German award practice.

According to the preamble, the Act has the intention to change general attitudes and thus alter social reality. Many experts doubt that this is really good news for employees. The well-established system of protecting employees in Germany has always had the side effect that employers are more and more reluctant to hire specially protected employees. It is assumed that the 'educational intention' of the Act will turn against those who shall be protected. However, education is more like farming than like manufacturing. Results may be different after another 12 month period.

Hans-Peter Loew is a partner at Lovells in Frankfurt.