- UK’s anti-discrimination laws called into question
UK employers could be hit by a massive bill for retrospective Age and Sexual Orientation related discrimination in occupational pension schemes going back decades, following two recent European Court of Justice cases, says Wedlake Bell, the City law firm.
Wedlake Bell says that UK pension schemes and their sponsoring employers expect only to have to pay damages for discrimination against members or their dependents on the basis of age or sexual orientation after 2 December 2006 and 1 December 2003 respectively. The cases shed doubt on the validity of the time limits in the UK legislation implementing the relevant EU directives.
Examples of possible discrimination in pension schemes include:
- Disqualifying younger spouses from claiming a survivor’s pension
- Disqualifying same sex civil partners from claiming a survivor’s pension
- Different accrual rates or employer contributions for employees of different ages
Jane Wolstenholme, Partner in Wedlake Bell’s Pensions team, says that the very significant implications for employers of the European cases Tadao Maruko -v- Versorgungswerk der deutschen Bühnen in April and Birgit Bartsch -v- Bosch und Siemens Hausgerate (BSH) Altersfursorge GmbH in May are only now filtering through.
In Maruko, the European Court of Justice (ECJ) decided in favour of the claimant over whether a person who is in a legal relationship very similar to the UK civil partnership with a member of the occupational pension scheme is entitled to a survivor’s pension.
In Bartsch, the Advocate General (AG) handed down his opinion on a case concerning the validity of a commonly-used provision in pension schemes under which a spouse would not get any of the member’s pension if they were a certain number of years younger than the member.
In both cases, one of the questions under consideration was the extent to which the directive has retrospective effect. Both the ECJ’s decision and the AG’s opinion confirmed that there should be no time limit*. However, under UK law, discrimination relating to periods of service before the legislation came into force is not unlawful.
Wedlake Bell explains that the ECJ decisions may allow discrimination claims relating to pensions to relate to the whole of a member’s benefits, not just those accrued by reference to service after the effective date of the UK implementation of the directive.
Comments Jane Wolstenholme, Partner in Wedlake Bell’s Pensions team; “These cases open the door to legal challenges which are likely to be hugely costly for employers.”
“Employers who have been sticking to the letter of the law could now find that the very basis of that law is unsound. Having thought that they didn’t need to worry about the past, they could now face the prospect of paying equalised retrospective benefits going back decades to huge numbers of members and members’ partners.”
“Since this won’t have been factored this into their liability assumptions, this is going to be a very painful blow. It could well spur even more companies to decide to pull the plug on their occupational schemes.”
“The Advocate General’s opinion in Bartsch indicates that the EU’s general antidiscrimination principles can be applied with so called “vertical effect”– meaning that employees could rely on these principles to take action directly against their employers, without infringement proceedings being brought against the UK Government first,” says Wolstenholme.
*In Bartsch, although the AG did not find in favour of the claimant on other grounds, the recommendation was that there would be no justification for a time limit if the judgment had been in her favour. Although the AG’s opinion is not binding on the ECJ, the court does usually follow it.