Such salary levels can not only be found in individual contracts but also in collective bargaining agreements which quite commonly provide for automatic pay-rises after certain times of service. These salary levels quite often also lead to an unequal payment of female employees due to the fact that the times of service of female employees fall short compared to those of their male colleagues. One of the main reasons for this is – at least in Germany - the fact that female employees are often giving up their work temporarily in order to raise their children. In a recent judgement (dating of 3 October 2006 – C 17/05) the European Court of Justice (“ECJ”) has now decided that such unequal payment based on the length of service does not violate European law and does not automatically constitute a discrimination. According to the judgement, employers may take into account the times of service when deciding salary levels in order to remunerate the longer job experience of senior employees if the experience enables the employee to perform better compared to colleagues with a shorter job experience. This does, however, also mean that an unequal payment may not be justified if there is no link between the job experience on the one hand and the quality of service on the other hand. Therefore, unequal pay based on the time of service will hardly be justified under European law if the job in question requires no special training or experience like for example cleaning services.

Before implementing pay schemes which are – among other factors – also based on the length of service a careful analysis should be undertaken by employers in order to estimate whether the intended scheme is justified and appropriate.