The Supreme Court has made an important ruling in a case brought by a gay man seeking to establish that if he died, his husband would be entitled to the same survivor's pension that a wife in a heterosexual marriage would receive. In Walker v Innospec Ltd, the court ruled that an exemption in the Equality Act 2010 allowing employers to exclude civil partners from pension benefits accrued before December 2005 is incompatible with EU law and should be disapplied.
Civil partnerships became possible on December 5 2005 – the date on which the Civil Partnership Act 2004 came into force. As it was previously lawful to discriminate against same-sex couples, the law contains an exemption for pension benefits which accrued before that date or are payable in respect of service before that date. Walker involved a challenge to the application of this exemption in an individual case.
Claimant John Walker is gay and has lived with his male partner since 1993. The couple entered into a civil partnership in January 2006 and later married. Walker was employed by Innospec Ltd from 1980 until he retired in 2003. Throughout his employment, he contributed to the company's occupational pension scheme.
In 2006 Walker asked Innospec to confirm that in the event of his death, it would pay his civil partner the spouse's pension for which the scheme provided. Innospec refused on the basis that the whole of Walker's service predated December 5 2005. In taking this approach, Innospec was relying on an exception in Schedule 9 of the Equality Act to the general anti-discrimination rule that applies to pension schemes. Under this exception, it is lawful to discriminate against employees in civil partnerships or same-sex marriages by preventing or restricting access to benefits:
- to which the right accrued before December 5 2005; or
- which are payable in respect of periods of service before that date.
Walker brought a claim for sexual orientation discrimination. The financial stakes were high. Under Innospec's approach, on Walker's death, his husband would be entitled to only a statutory minimum pension of around £1,000 a year. If he had been married to a woman, she would have received an annual spouse's pension of over £45,000 in the same circumstances.
The Employment Tribunal upheld Walker's claim. However, this was overturned on Innospec's appeal to the Employment Appeal Tribunal. Walker therefore appealed to the Court of Appeal.
The case revolved around complex arguments as to the retrospective application of EU legislation and – specifically – the EU Equal Treatment Framework Directive (2000/78/EC), which prohibits discrimination in employment on various grounds, including sexual orientation.
The Court of Appeal decided that Walker's case must be assessed on the basis of the EU law in force at the time of his employment. It stated that the EU principle of no retroactivity meant that conduct which was lawful when it occurred could not become unlawful retroactively. The court concluded that the exemption in Schedule 9 of the Equality Act was not inconsistent with the Equal Treatment Framework Directive; therefore, the survivor's pension for a civil partner could lawfully be restricted so that it reflected the period of the deceased's pensionable service only after December 5 2005.
Walker made a final appeal to the Supreme Court. The court's options were to decide either that:
- the full benefit would not be payable, because at the time that Walker was working for Innospec and building up rights under his pension it was lawful to discriminate against same-sex couples – it would be unfair for Innospec to be bound by a law that came into force later; or
- the full survivor's benefit was payable, because discrimination against same-sex couples that are married or in a civil partnership is now unlawful and will be when Walker's husband becomes entitled to the payment – this would not be unfair because it involves applying the present law.
The Supreme Court unanimously allowed the appeal and declared that the exception in Schedule 9 of the Equality Act is incompatible with EU law and must be disapplied. The upshot is that Walker's husband – provided that the couple remain married – will be entitled to a full survivor's pension on Walker's death. However, the five judges were split in how they arrived at this result. The main reasoning of the three majority judges was as follows:
- In applying the no retroactivity principle, the Court of Appeal had been wrongly influenced by a string of European Court of Justice (ECJ) judgments dealing with pensions equality as between men and women (starting with Barber v Guardian Royal Exchange Assurance Group (1990) IRLR 240). While the ECJ had limited the retrospective effect of its rulings in those cases, the Supreme Court held that this was not relevant to the temporal application of EU legislation (eg, the Equal Treatment Framework Directive).
- The point of unequal treatment occurs at the time that the pension falls to be paid and the period during which Walker acquired that entitlement was immaterial. The financing of Innospec's pension scheme should have taken into account a possible change in Walker's marital status and he could not have been denied entitlement to a spouse's pension if he married a woman after he retired. His marriage was as legal as a heterosexual marriage; therefore, his entitlement to a spouse's pension was equally well founded.
- Two ECJ judgments put the validity of Walker's claim beyond doubt – Maruko ((2008) IRLR 450) and Römer (Case C-147/08). In these cases, the ECJ specifically decided that it was contrary to the Equal Treatment Framework Directive for same-sex civil partners not to have the same right to a survivor's benefit under an occupational pension scheme as surviving spouses in a similar position. It was clear from these judgments that – unless evidence established that there would be unacceptable economic or social consequences of giving effect to Walker's entitlement to a survivor's pension for his husband – there was no reason that he should be subject to unequal treatment.
The two minority judges agreed that Walker's appeal should be allowed, but on a more limited basis – essentially, the second point outlined above. They considered that the question of who qualified as Walker's spouse should be answered when the pension fell to be paid, when it would be unlawful under the Equal Treatment Framework Directive to discriminate between heterosexual and same-sex marriages.
The minority judges noted that the court had heard Walker's appeal at the same time as another case, O'Brien v Ministry of Justice, which concerned the pension rights of part-time workers (specifically, fee-paid part-time judges). The court had referred various questions to the ECJ to help to resolve that case, which would involve consideration of the Barber line of cases on pensions equality. Pending the ECJ's judgment in O'Brien, the minority judges preferred not to decide on whether those authorities were relevant to the application of the Equal Treatment Framework Directive in Walker.
The restrictions on backdating in Schedule 9 of the Equality Act 2010 were originally enacted in 2005, the year after the United Kingdom adopted civil partnerships by amending the Sexual Orientation Regulations that were in force. Three years later, the ECJ ruling in Maruko cast serious doubt as to whether the UK exception was consistent with the requirements of EU law. It has taken many more years for this to be finally confirmed in Walker.
The result has unsurprisingly been hailed as a landmark victory for gay rights, not least by human rights and civil liberties organisation Liberty, which supported and acted for Walker in his legal proceedings. The judgment will pave the way for other gay couples in a similar position to Walker and his husband. While many occupational pension schemes have already retrospectively equalised the treatment of gay married members and civil partners with that of opposite-sex married members, a significant proportion have not. It has been estimated that the potential financial repercussions for such schemes could be around £100 million for private sector schemes and much more for those in the public sector.
A government spokesperson has reportedly said that the government is considering the implications of the judgment and will respond in due course. There has already been a detailed government review of the differences in survivor benefits provided by occupational pension schemes for opposite and same-sex couples in legal relationships, the findings of which were published in June 2014. The government since declined to make a decision as to whether and how the law should be changed, most likely because it was awaiting the outcome of Walker's case.
This case centered on the relationship between UK and EU law and whether the provision of a domestic statute was consistent with the United Kingdom's obligations contained in the underlying EU directive. The judgment highlights the supremacy of EU law in this respect. It will therefore be intriguing to see how the government will proceed on account of Brexit. If and when the United Kingdom leaves the European Union, it could – depending on the agreed terms of departure – be possible for the United Kingdom to legislate in a way that falls short of the requirements of the Equal Treatment Framework Directive in relation to same-sex survivors' pensions.
For further information on this topic please contact Michael Burd at Lewis Silkin by telephone (+44 20 7074 8000) or email ([email protected]). The Lewis Silkin website can be accessed at www.lewissilkin.com.