German law makes it difficult for employers to gather information on the diversity of their workforces, but the new EU Corporate Reporting Sustainability Directive could make it easier.

Nowadays many organisations have set themselves the goal of promoting a diverse workforce. Diversity monitoring could be a useful first step in this direction, but raises legal concerns in Germany. However, this could soon change due to new European legal requirements.

Diversity monitoring in Germany

Diversity monitoring, that is the targeted collection of information on diversity characteristics of the workforce (such as migration background, religion, disability, social origin etc.), is increasingly becoming a focus of corporate management in Germany. In the Anglo-American world, these processes are quite common due to legal requirements. Therefore, German subsidiaries of international corporations are increasingly confronted with enquiries about the diversity of their workforce. This trend will intensify in the future, as explained later.

The current German legal situation

More and more organisations claim they intend to promote a diverse workforce. At the same time, targeted hiring of applicants based on diversity factors is incompatible with the German Equal Treatment Act (the AGG). However, taking stock of the diversity of the workforce as a first step could help identify appropriate measures to ultimately promote diversity.

Nevertheless, even if the insights gained may be desirable, there are considerable concerns with diversity monitoring under current law. In most cases, collecting and processing the data concerned will not be considered 'necessary' in the sense of the Federal Data Protection Act (except, for example, for information about a severe disability, which the employer needs to know in order to fulfil its obligations under the Social Code IX).

Of course, data may be requested and processed on a voluntary basis. However, this requires the consent of the employees. This consent would have to indicate the scope and purpose of the data processing, and it would be revocable by the employee at any time. Strict requirements now also apply where data is transferred to the US due to the ECJ's Schrems II decision. Moreover, the diversity criteria will usually be processed or stored via technical equipment. In this case, the employer would have to respect the works council's right of co-determination under s87 (1) 6 of the German Works Constitution Act.

In sum, diversity monitoring faces considerable legal challenges. A mere request by a group company, which requires data for its reporting, is unlikely to constitute a sufficient basis for data collection and processing.

New EU rules in 2022

However, the topic of diversity will inevitably gain importance in the German legal system. The background to this is the EU's Corporate Sustainability Reporting Directive (CSRD), which is expected to come into force in 2022 and needs to be implemented into national legal systems with effect from the financial year 2023. The directive imposes reporting obligations on ESG factors (environmental, social, governance) on a large number of companies. 'Social' factors will in particular include the current status of diversity on a company's board and among its employees, as well as measures promoting diversity in the workplace.

If, however, organisations are required to report on the diversity of their workforce, they will need the relevant data to do so. The current status of the CSRD does not answer the question of how this data can be collected in compliance with data protection regulations. Employers should therefore pay attention to the forthcoming transposition of the directive into German law. Depending on how it is structured, it may be easier to implement diversity monitoring in compliance with German and European data protection law.

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