Equal treatment principle – wage increase despite rejection of the new contract

Employers may not restrict voluntary wage increases across the board to employees with new contract templates. If no valid objective reasons for unequal treatment can be given, employees with old contracts are also entitled to the pay increase. This was clarified by the Federal Labor Court in a recent ruling (judgment of November 26, 2025 – 5 AZR 239/24).

Facts of the case

The ruling of the Federal Labor Court (BAG) is based on the following facts: The plaintiff has been working for the defendant in production since 2015 and received a gross monthly base salary of €2,451.00 at the end of 2022. At the beginning of 2022, the defendant offered its workforce a new standard employment contract with a 4% increase in basic salary, which the majority of employees accepted – the plaintiff refused and retained her old contract.

From January 2023, the defendant increased the basic salary by 5% only for employees with the new contract. The plaintiff, who was now unable to work due to illness, continued to receive her previous, unchanged salary as continued pay and demanded a total of €148.81 gross in back pay for January and February 2023. She believes that this constitutes unjustified unequal treatment.

Both the labor court and the regional labor court dismissed the claim; the Federal Labor Court upheld the plaintiff's appeal.

Reasons for the decision

The Federal Labor Court found that the principle of equal treatment under labor law obliges employers to treat comparable employees equally in their own company regulations or voluntary benefits (such as a general salary increase) – differentiations are only permissible if there is a legitimate purpose and if they are necessary and appropriate.

In the present case, the defendant had limited the wage increase to employees with new contracts across the board. However, the plaintiff was comparable to the favored employees insofar as the existence of an employment relationship had been the decisive criterion for the salary increase. Differences in the individual terms of the employment contracts were irrelevant in terms of comparability and could at most play a role in justifying the unequal treatment.

The defendant argued that the wage increase was intended as an incentive to convert the contract. The Federal Labor Court rejected this argument, as employees who had already signed the new contract could no longer contribute to standardization and therefore could not be given preferential treatment (again) for the purpose of providing an incentive. The BAG also did not accept that this constituted a reward for those who converted their contracts, as the basic wage alone represented the consideration for the work. There were no other objective reasons for differentiation, such as compensation for poorer conditions.

The plaintiff was therefore wrongfully excluded from the wage increase and is entitled to back pay.

Practical advice

When granting voluntary wage increases, employers must carefully examine whether distinctions between employee groups can be justified on sound and legally tenable grounds. Simply belonging to “old” or “new” contracts is generally not sufficient for this. The only decisive factor is whether there are objective reasons for different treatment that are based on the purpose of the benefit; incentives to change contracts or rewards for changes already made are not appropriate according to BAG case law.

If general pay increases are decided upon, the entire comparable workforce must be included – otherwise there is a risk of having to make back payments and further claims arising from the principle of equal treatment. Linking the pay increase to the signing of a contract is therefore not an effective means of introducing uniform contractual provisions.