Loss of earnings following a breach of the AGG: No payment until retirement

A job applicant who had been discriminated against claimed the difference in salary up to retirement age. The Federal Labour Court (BAG) rejected this claim. Liability ceases once the applicant has secured a new, permanent post.

The ruling

The legal dispute lasted seventeen years. It was brought to a close by a judgement of 10 September 2026 handed down by the Eighth Senate of the Federal Labour Court.

In 2009, the claimant had applied to an insurance company for a position on a trainee programme. His application was rejected. In 2018, the Hessian Regional Labour Court ruled, with final effect, that the rejection constituted discrimination on the grounds of age. At the same time, the defendant was ordered to compensate the claimant for ‘all future material damages’ arising from the failure to recruit him. A settlement was reached in 2021 regarding the loss of earnings up to 2017. However, this did not settle the matter: for the period 2020 to 2023, the claimant sought a further sum of around 236,000 euros, calculated as the difference between the notional salary he would have received from the defendant and his actual earnings. In his view, the claim continued until he reached retirement age.

The Labour Court and the Regional Labour Court dismissed the claim; the appeal on points of law was unsuccessful. It is true that, in the Federal Labour Court’s view, the obligation to pay compensation under Section 15(1), first sentence, of the General Equal Treatment Act (AGG) is not limited from the outset. However, the causal link between non-recruitment and loss of earnings ceases to apply as soon as a new, suitable job has been found and has become established. This was the case here. The claimant had already been employed in a post commensurate with his qualifications at a Central Immigration Authority prior to 2020, and had been so for several years. His subsequent career development is therefore attributed to general life risks. The grounds for the judgement have not yet been published.

Legal framework

The AGG protects not only employees but also job applicants (Section 6(1), second sentence, AGG). No one may be disadvantaged on the grounds of any of the characteristics listed in Section 1 AGG, such as age, gender, ethnic origin, religion or disability (Section 7 AGG). An applicant is defined as anyone who submits an application. Whether the person is seriously interested in the post is initially irrelevant. The employer must prove an abuse of rights on a case-by-case basis.

The real risk lies in the burden of proof. The job applicant need only present circumstantial evidence suggesting discrimination (Section 22 AGG). The employer must then prove that no breach occurred. Indicia often include an awkwardly worded job advertisement, a failure to provide reasons for rejection, or a misleading remark made during an interview. Errors made by a contracted recruitment agency are attributed to the employer.

If a breach is established, two types of claim may arise. These are often confused, but differ significantly.

• Compensation (Section 15(2) of the AGG). This is ‘compensation for pain and suffering’ for the discrimination itself. Requirements: discrimination on the basis of a characteristic covered by the AGG and the claim being made within the prescribed time limit. Fault is irrelevant; financial loss is not required. The court determines the amount based on the circumstances, such as the nature and severity of the disadvantage. If the applicant would not have been offered the post in any case, an upper limit of three months’ salary applies. The employer must prove this.
• Compensation for damages (Section 15(1) AGG). Compensation for genuine financial loss. In practice, this almost always takes the form of loss of earnings: the salary the applicant would have earned had they been appointed, less their actual income (Sections 249, 252 of the German Civil Code (BGB)). It was precisely this claim that was at the heart of the Federal Labour Court (BAG) case. Prerequisites: a breach for which the employer is responsible, specific damage and causation. The applicant must prove that they would have been appointed had the selection process been fair, i.e. that they were the best-qualified candidate. The simplified procedure under Section 22 of the AGG does not apply here. The law does not provide for an upper limit. As the pay gap may continue year after year, this is where the major risk lies. The Federal Labour Court (BAG) has now clarified where this liability ends.

There is no entitlement to employment (Section 15(6) of the AGG). Both claims must be asserted in writing within two months of receiving the rejection (Section 15(4) of the AGG), and legal proceedings must be brought within a further three months (Section 61b of the ArbGG). The duration for which loss of earnings is payable had previously been unclear. In some cases, reference was made to the first opportunity to give notice or Sections 9 and 10 of the Employment Protection Act (KSchG), whilst in others, ‘indefinite damages’ were considered a possibility.

Implications for practice

Whilst the judgement provides some relief for employers, it is nothing more than that. Loss of earnings up to retirement age is ruled out. However, no fixed time limit is set either. It will continue to depend on the individual case. The requirements set by the Federal Labour Court (BAG) for ‘appropriate’ and ‘established’ subsequent employment will only become clear from the grounds of the judgement. Even then, due to the need for a case-by-case assessment, a risk remains, particularly if the applicant remains unemployed or works in a role significantly below their qualifications.

The primary aim of employers should therefore continue to be to prevent claims under the AGG from arising in the first place.

This can be achieved in particular through the following measures:

• Review job advertisements: Every advertisement should be checked before publication to ensure it does not unconsciously exclude certain groups (Section 11 AGG). Phrases such as ‘young team’, ‘digital native’ or ‘career starter’ may seem harmless, but are quickly interpreted by the courts as evidence of age discrimination. Document the selection process in a transparent manner. The selection criteria should be established before applications are reviewed, and the decision should be briefly justified in writing. This is the only way to prove, in the event of a dispute, that objective reasons were decisive. In the case of applicants with severe disabilities, the obligations under SGB IX, as well as the involvement of the works council and the representative body for employees with severe disabilities, must also be observed.
• Check time limits immediately: If a letter of claim is received, it should first be clarified whether the two-month time limit under Section 15(4) of the AGG has been met and whether the claim was brought in good time within three months in accordance with Section 61b of the ArbGG. If there are indications of ‘AGG-hopping’ – such as numerous similar applications from the same person – these should be documented at an early stage.
• Challenge the claim of being the best-qualified candidate: When claiming damages, the applicant must prove that they would actually have been offered the post had the selection process been fair. This burden of proof should not be shifted away from them. A comparison with the candidate who was actually appointed is often the strongest argument here.
• Enquire about income and job-seeking efforts: Anyone claiming loss of earnings must disclose what they actually earn, where they have applied for jobs, and what job placements the Jobcentre has suggested. Furthermore, if the applicant is sent suitable job offers, this strengthens the argument that they have breached their duty to mitigate losses under Section 254(2) of the German Civil Code (BGB).
• Limiting claims for a declaratory judgement: Unlimited claims seeking a declaration of ‘all future losses’ should be challenged at an early stage. This case demonstrates that such a judgement can tie up an employer for years and across several subsequent legal proceedings.
• Settlements only with a settlement clause: A settlement should expressly cover all future material damages as well, so that no claims for later periods remain outstanding. The designation of the payment as ‘compensation’ or ‘damages’ should also be chosen carefully, as it has tax implications.

Conclusion

Compensation serves to provide redress, not to enrich the claimant. Anyone who has secured a suitable new position on a permanent basis bears the subsequent occupational risk themselves. However, this is no cause for employers to breathe a sigh of relief. Until such a position is found, the loss of earnings can mount up over the years. In the case in question, a net sum of around 340,000 euros was claimed for the period 2009 to 2017 alone; the settlement amounted to 100,000 euros. If the applicant remains unemployed or in significantly underpaid employment, there is little prospect of liability coming to an end. A single error in the recruitment process can very quickly result in a six-figure sum. The best protection for employers remains a documented, non-discriminatory recruitment process.

(Federal Labour Court, judgement of 10 September 2026 – 8 AZR 153/25)