The Employment Appeal Tribunal has found (overturning the Employment Tribunal's decision) that the exemption under the Equality Act 2010 that allows schemes to pay the civil partner of a scheme member benefits in relation to the member’s pensionable service with the scheme from 5 December 2005 only is not unlawfully discriminatory.
With effect from 5 December 2005, the Civil Partnership Act 2004 enabled same sex couples to enter into a registered civil partnership. However, a legal exemption introduced at that time, and currently contained in paragraph 18(1) of Schedule 9 to the Equality Act 2010 ("the Civil Partners Exemption") effectively permits an employer's pension scheme to exclude a member's civil partner from receiving death benefits to the extent they would be attributable to the period of the member's pensionable service before 5 December 2005 (apart from any accrued contracted-out benefits; these must be provided in respect of the member's contracted-out service from 6 April 1988).
Mr John Walker, a retired member of the chemical company Innospec's pension scheme, challenged the Civil Partners Exemption in the Manchester Employment Tribunal in 2012. He complained that his civil partner should be entitled to the same pension as an equivalent legal spouse. The Employment Tribunal found in November 2012 that the company and the trustees had discriminated both directly and indirectly against Mr Walker by refusing to provide a civil partner's pension which would be equivalent to a legal spouse's pension. In reaching its decision, it found that the Civil Partner's Exemption was unlawfully discriminatory and in contravention of the EU Framework Directive which prohibits discrimination on various grounds, including on the ground of a person's sexual orientation. For our briefing on the Tribunal's decision, click here
Issues considered by the EAT
The Employment Appeal Tribunal considered the following key points:
Whether the Framework Directive (which, broadly, was to be implemented by Member States by 2 December 2003) had retrospective affect. If it did, then the Civil Partners Exemption would be in contravention of the Directive.
If the Civil Partners Exemption was incompatible with the Framework Directive, whether the Tribunal could interpret the exemption so as to provide for a survivor's pension as if Mr Walker's partner were his legal spouse, or whether it could disapply the Exemption.
The Employment Appeal Tribunal held that the Directive did not have retrospective affect. As far as the Tribunal was aware, it has not been the case that a provision making particular forms of discrimination unlawful in European law had retrospective affect so as to render unlawful acts which at the time when they were done would not have breached the law. The Court cited decisions of the Court of justice of the European Union in cases such as Barber V Guardian Royal Exchange Assurance group (Case C-262/880)  ICR 616 ECJ to demonstrate that the principles of European Law do not generally have retrospective effect.
In Barber, the Court had ruled that pensions were deferred pay for the purposes of, at the time, Article 119 of the EEC Treaty which provides that there could be no discrimination between men and women as regards pay. However, the Court also ruled in Barber that as far as entitlement to a pension was concerned, Article 119 could not be relied on prior to the date of the Barber judgment (17 May 1990) (except in the case of workers or those claiming under them who had initiated legal proceedings or raised an equivalent claim before that date). So was the case with the Framework Directive which did not have retrospective effect before the last date from which the member states could transpose a directive into domestic legislation. The Civil Partners Exemption was not therefore in contravention of the Directive.
Even if the Exemption had been in contravention of the Framework Directive, the Employment Appeal Tribunal considered if it could rely on the principle that where a statutory provision is, on a domestic construction, incompatible with European law, the domestic provision must be interpreted as far as possible to achieve conformity with EU law. The Court found that although it is possible to read domestic legislation up (expansively) or down (restrictively) or to read words into domestic legislation so as to read the statute to comply as far as possible with the relevant EU law, this did not mean that a court would depart from the fundamental features of the legislation. A court was not a legislator. It was clear that the Exemption had allowed schemes to discriminate for periods of service before 5 December 2005, and the Court could not interpret it otherwise. If it did so, it would not be interpreting but rather legislating and a Court was not a legislator.
In terms of whether it could disapply the Civil Partners Exemption, the Court considered whether the legal principle under which member states are to discontinue, and disregard or set aside discriminatory provisions applied. The Court held that for the principle to apply the contents must fall within the scope of European Union law. As the Framework Directive only required member states to lay down a framework for combatting discrimination on the grounds of sexual orientation by 3 December 2003 and all of Mr Walker's service was completed before this date, the principle could not be applied here.
Many schemes already provide for civil partners to be entitled to the same benefits as a legal spouse. Those who have however relied on the Civil Partners Exemption and provide for civil partners' benefits in respect of pensionable service from 5 December 2005 will be relieved that they do not have to reconsider their rules (at least for now).
The Government is committed to reviewing the differences in survivor benefits for opposite-sex couples and same-sex couples in legal relationships in occupational pension schemes, however. The review is required under the Marriage (Same Sex Couples) Act 2013. In particular, the Act requires the Government to review the Civil Partners Exemption and to publish its findings in a report before 1 July 2014. Following publication of the report, the Secretary of State may adopt provisions to reduce or eliminate relevant differences in survivors' benefits in occupational pension schemes. The review could result in further changes in the law and schemes that do not provide full benefits for civil partners and, following the coming into force of The Marriage (Same Sex Couples) Act 2013 on 13 March 2014, for same sex spouses may need to consider their provisions again.
Innospec Limited & Others v Mr J. Walker and Secretary of State for Work and Pensions UKEAT/0232/13/LA